Power in Any Circumstance

“When my mother was diagnosed with a life-threatening cancer a few summers ago, she was convinced that my knowledge of the medical system would help save her.

“Part of me believed it, too. I have spent the past eight years writing this column, which is predicated on the belief that we all have the power to take charge of -- and improve -- our health…

“But the odds my mother faced were daunting. She was diagnosed with esophageal adenocarcinoma, a deadly cancer fueled by years of acid reflux…

“We asked other doctors where they would go, and they all recommended the same oncologist…

“The recommended oncologist was caring and communicative. He answered my questions about new treatments. Most important, he was interested in my mother, her children and grandchildren, and the fact that she wanted to aggressively battle her disease. After just a few treatments, her cancer had all but disappeared from her body. We were hopeful.

“But the cancer eventually rebounded with a vengeance. Less than nine months after the diagnosis, my mother entered hospice care. Her confidence in her doctor gave my mom an unwavering calm as she faced death. ‘You just have to let me go,’ she told me. She died a few weeks later…

“Even though my mother didn't beat the odds, her illness affirmed my belief that everyone has the power to take control of their health. Taking charge didn't save my mother's life, but it made the end of her life better, and gave all of us confidence in her care and the choices she made.”

(“Lessons Learned From Doctors, Patients and My Mother.” Tara Parker-Pope. Wall Street Journal: August 28, 2007. pg. D.1)


AN INTERNAL locus of control and a human touch may not win all battles, but we can develop greater knowledge, more care-full control, and confidence in light of all circumstances.

Heart: On a Wing and a Prayer

“Capt. Denny Flanagan is a rare bird in today's frustration-filled air-travel world -- a pilot who goes out of his way to make flying fun for passengers.

“When pets travel in cargo compartments, the United Airlines veteran snaps pictures of them with his cellphone camera, then shows owners that their animals are on board. In the air, he has flight attendants raffle off 10% discount coupons and unopened bottles of wine. He writes notes to first-class passengers and elite-level frequent fliers on the back of his business cards, addressing them by name and thanking them for their business. If flights are delayed or diverted to other cities because of storms, Capt. Flanagan tries to find a McDonald's where he can order 200 hamburgers, or a snack shop that has apples or bananas he can hand out.

“And when unaccompanied children are on his flights, he personally calls parents with reassuring updates. ‘I picked up the phone and he said, This is the captain from your son's flight,' said Kenneth Klein, whose 12-year-old son was delayed by thunderstorms in Chicago last month on a trip from Los Angeles to see his grandfather in Toronto. ‘It was unbelievable. One of the big problems is kids sit on planes and no one tells you what's happening, and this was the exact opposite.’

“So unusual is the service that Capt. Flanagan has been a subject of discussion on FlyerTalk.com, an online community for road warriors.

“Mark B. Lasser, a Denver advertising-sales executive, came off a Capt. Flanagan flight and posted a question on FlyerTalk.com about why the pilot had been so friendly. ‘I don't trust UA at all but can't figure out what the ulterior motive is,’ he wrote.

“Others quickly came to Capt. Flanagan's defense. ‘I've had this pilot before -- what a great guy. He does the same thing on every flight,’ said a FlyerTalk regular.

“Mr. Lasser says he just wishes Capt. Flanagan weren't such a rarity among United employees. ‘Every flight before and most flights since have been so poor in customer service that this guy really came across as representing his own standards more than the company's. He's an outlier within United,’ Mr. Lasser said in an interview...

"’He's a great ambassador for the company,’ says Graham Atkinson, United's executive vice president and ‘Chief Customer Officer,’ who is leading an effort to boost customer service. He hopes more pilots and airport workers will adopt some of Capt. Flanagan's techniques.”

(“To a United Pilot, The Friendly Skies Are a Point of Pride; Capt. Flanagan Goes to Bat For His Harried Passengers; Still, Some Online Skeptics.” Scott McCartney. Wall Street Journal: August 28, 2007. pg. A.1)


HOPING that more employees will catch the spirit, feel deeply, and get in touch, the "Chief Customer Officer" stands in awe of an authentic leader.

Curiosity & Personal Improvement

"One can build a successful business by appealing to the intelligence of the American people…

"I often see... older 'returning' students in night classes at my university, and count it a privilege to work with them. Unlike the younger students, they are not there because they have to be. Their unfeigned passion for knowledge and self-improvement, their heightened stake in the material under study, are inspiring and infectious.

"They come with motives deeper and more complicated than a mere desire to acquire organized and accredited knowledge about a subject. If that were all education was about, then, yes, DVDs and distance learning would soon supplant the classroom. But they want something more intangible than that. They come to school seeking some kind of renewal, hoping for a chance to better themselves -- to pursue their deferred dream, or their unexplored interests -- or just to move beyond the constraints of their current lives and perhaps learn what they didn't pick up the first time around. That's what the university represents for them, and it reflects a very American faith in human possibility.

"And one of the chief things that they come to class for is something that a tape or a TV or even the best virtual connection cannot ever provide: The bodily presence of others. It is one thing to listen alone to a videotaped lecture, it is quite another to hear the same subject expounded by a flesh-and-blood human being standing there before you -- someone responsive to your questions, attentive to your particular concerns, capable of cracking jokes about the events of the day, someone with the full range of human quirks and oddities, and yet also someone for whom the subject forms a living and present reality, and with whom you can have a personal relationship.

"There is an electricity in the sheer human presence that draws us in, as every theatergoer or churchgoer knows, in ways that can be only remotely approximated by televised or online content. That electricity is generated not merely by one's teacher but also by the presence of one's fellow students, whose company makes the classroom into a community of sorts. That experience of connection with others in the disinterested pursuit of knowledge is one of life's great pleasures, and it is a considerable part of what students are searching for when they return. I only wish that they found it more often than they do."

(“WEEKEND JOURNAL; Taste: Prof in a Box.” Wilfred M. Mcclay. Wall Street Journal: August 24, 2007. pg. W.11)

AN OLD, INFIRM man once said, "The thing that keeps me going from day to day is that I can't wait to see what's next." Curiosity, a hunger and thirst for growth, and the richness and texture of human interaction provide us with fertile ground for development, satisfaction and success.

Moral Hazard

“Everybody talks about moral hazard. A wisp of memory came to mind last week. Then-Fannie Mae chief Franklin Raines visited The Journal years ago and entertained himself by mocking editorial writers who assume that establishing that a policy is economically inefficient is enough to establish that it's unwise.

“He yukked it up quite a bit, in fact, noting that voters are perfectly entitled to assert values other than those of the market, namely that homeownership is a social blessing and should be encouraged with subsidies...

“But a home financed by a mortgage is not just an asset. It's also a liability...

“Of low-income households from a nationally representative sample who became homeowners between 1977 and 1993, fully 36% returned to renting in two years, and 53% in five years...

“Even among those who held on to their homes for 10 years, the average price-appreciation gain was 30% -- less than if their money had been invested in Treasury bills...

“A typical low-income household might spend half the family income on mortgage costs, leaving less money for a rainy day or investing in education. Their less-marketable homes apparently also tended to tie them down, making them less likely to relocate for a job...

“Almost needless to add, the great squarer of circles for middle-income homeowners, the mortgage-interest deduction, won't turn a house into a paying proposition for those with little income to shelter.

“Bottom line: Homeownership likely has had an exceedingly poor payoff for millions of low-income purchasers, perhaps even blighting the prospects of what might otherwise be upwardly mobile families.”

(“Business World: Payback.” by Holman W. Jenkins, Jr. Wall Street Journal: August 22, 2007. pg. A.14)


SUBSIDIES, OR OPPORTUNITIES? Is is really that counter-intuitive to suggest that principles such as educational opportunity and the economic efficiency of the market are enduring while hand-outs are fleeting?

The Relentless Restless Pursuit...

“As rising wages and attrition rates in India spur some international companies to seek new locales for outsourcing operations, Southeast Asia, Eastern Europe and Latin America have all been competing to become new offshore hubs.

“Now, the Middle East and North Africa are elbowing into the race to host remote sales staff, service centers, tech support and the like, thanks to a favorable time zone, a multilingual work force and an oil-fueled investment and expansion spree. Companies also are attracted by some efforts by some governments there to diversify and liberalize their economies, as well as the prospect of tapping into the growing local market...

“Satyam Computer Services Ltd. is hiring 300 people for a new center in Cairo that will handle clients in Saudi Arabia and the Arab world. Earlier this year, Wipro Ltd. set up an outsourcing joint venture in Saudi Arabia and recently announced plans to enter Egypt. Tata Consultancy Services Ltd. says it will soon start offering services from Morocco to French-speaking European clients…

"’There is a lot of money flowing in the region, and it doesn't make sense to not make best use of it,’ says Virender Aggarwal, Satyam's director and senior vice president for Asia-Pacific, Middle East, India and Africa.

“Much of the Middle East offers the same appeal other outsourcing hot spots have: cheap, skilled labor. But companies are finding other advantages, including a time zone that roughly straddles the world's three biggest economies -- North America, Europe and Asia. The region's geographic proximity to Europe and a multilingual labor force also help. And with business booming in much of the Mideast, there is more demand for Arabic speakers.

“In recent years, Egypt, Jordan and the United Arab Emirates have all broken into the top 20 most-attractive offshoring destinations, according to an index published by consultancy A.T. Kearney Inc. Tunisia, Morocco, Israel and Turkey made the top 50 in this year's list.

"’The Middle East region is going to be, I think, the next big destination,’ says Simon Bell, an A.T. Kearney principal, who has worked with the Egyptian government recently on ways to draw in more offshore work.”

(“Politics & Economics: Middle East Beckons as Outsourcing Hot Spot; Oil Boom Creates Attractive Region; Instability Worries.” by Mariam Fam. Wall Street Journal: August 21, 2007. p. A.6)


SO WHAT have we learned outsourcing in India that is applicable in the Middle East? How well are we measuring efficiency fully loaded? How well are we evaluating its effectiveness fully loaded? What are our time horizons? How do our customers feel about this?

Go Where They Ain't

"The bond market has seized up, stocks are in turmoil, private-equity funds are sidelined and hedge-fund managers and lenders are hosting fire sales.

"These are happy days for Warren Buffett.

"'I can spend money faster than Imelda Marcos when things are right,' he says, referring to the former Philippines first lady and renowned shopper.

"For the past three years, Mr. Buffett's traditional bargain-hunting investment strategy has been partly stymied as debt-fueled private-equity funds and hedge funds drove asset prices out of his value-investing orbit.

"The result: Today he's sitting on a war chest of nearly $50 billion in cash.

"Now, with the shakeout in the subprime-mortgage market forcing the end of easy money and the distressed sale of assets -- such as Thornburg Mortgage Inc.'s sale yesterday of $20.5 billion of its top-rated mortgage-backed securities -- many see Mr. Buffett, the 76 year-old chairman of the giant Berkshire Hathaway Inc. holding company, as one of the last buyers standing."


(“After the Tumult, Is It Buffett Time?; Berkshire Chief Finds His Popularity Grows As More Loans Falter.” by Karen Richardson. Wall Street Journal: August 21, 2007. pg. C.1)

SO MUCH for the lemmings...

Priorities Priorities

“Alcoa Inc. tapped former Siemens AG Chief Executive Klaus Kleinfeld as its No. 2 and likely successor to its current CEO...

“The appointment of Mr. Kleinfeld, a 49-year-old German with significant global deal-making experience, also marks a gamble that Mr. Kleinfeld won't be tainted by the investigations at Siemens. Mr. Kleinfeld announced in late April that he would step down from the German conglomerate after the supervisory board again delayed extending his contract amid a widening corruption scandal.

“Mr. Kleinfeld says he didn't do anything wrong, but critics accused top management of not doing enough in recent years to clamp down on alleged bribery. Criminal prosecutors from several countries, including the U.S., are investigating allegations that Siemens managers paid bribes to potential customers abroad over several years.

"’The board did look into that aspect and is quite comfortable and satisfied that Mr. Kleinfeld is a person of the highest integrity,’ said Kevin Lowery, a spokesman for New York-based Alcoa. He said the company hadn't included any contract language to protect itself if Mr. Kleinfeld should become involved in any investigations at Siemens.

“Alcoa said Mr. Kleinfeld wasn't available for comment.”

(Alcoa Puts Faith in Ex-Siemens CEO. Wall Street Journal: August 16, 2007. p. A.12)

ME TOO: I really have no comment either.

The Ol' Ball & Chain v.3

"During the preholiday crush last December, a computer maker asked staffing company Adecco SA for 300 additional factory workers -- immediately. Using an instant-messaging program, Senior Vice President Steve Baruch tapped managers in three states to line up the workers within hours. If he had relied on email and phone calls, Mr. Baruch says, the same process could have taken him as long as three days.

"Instant messaging is invading and changing the workplace. Employees started to sneak instant messaging into the office in the late 1990s, but now more companies are endorsing it. Faster and more casual than email, instant messaging can foster broader collaboration among employees even as it further blurs the boundaries between work and life...

"Unlike email, instant messaging offers ‘presence’ -- a snapshot of which colleagues are available at a given moment, world-wide. Together with allied Internet technologies such as blogs and wikis, it is ‘changing the way people collaborate,’ says Andrew McAfee, an associate professor at Harvard Business School. Companies ‘increasingly react to situations and problems on the fly, not solely by hierarchy,’ he says.

"Instant messaging can ‘scare managers who were taught they need to be in control,’ says Marty Anderson, a professor at the Olin Graduate School of Business at Babson College. But others embrace the technology."

(“Instant Messaging Invades the Office; Companies Say It Spurs Broader Collaboration -- And Scares Some Bosses.” by Carola Mamberto. Wall Street Journal: July 24, 2007. pg. B.1)


FASTER is better! 24/7 is wiser! Instant is smarter! If the world is in a frenzy, be sure to get swept up in it! Who's in control, and who is out of control?

Dare To See, Think And Feel Differently

“A number of large employers, such as McDonald's Corp. and Wal-Mart Stores Inc., recruit people with disabilities to be cashiers, maintenance workers or store greeters. At Home Depot Inc., developmentally disabled workers stock shelves, clean displays and help customers find items. Home Depot has been working with a nonprofit organization called Ken's Kids, which was formed a decade ago by a group of parents seeking employment opportunities for their young-adult children, and has placed more than 100 people in 54 stores. In addition, smaller businesses around the nation have made a goal of employing workers passed over by other companies.

“Still, executives at Walgreen and the social-services agencies working with it believe the company's program has a larger number of disabled employees, doing more-sophisticated work, than is typically available to people with mental and physical challenges…

"’One thing we found is they can all do the job,’ says Randy Lewis, a senior vice president of distribution and logistics at Walgreen... ‘What surprised us is the environment that it's created. It's a building where everybody helps each other out’."


(“Erasing 'Un' From 'Unemployable'; Walgreen Program Trains the Disabled To Take on Regular Wage-Paying Jobs.” by Amy Merrick. Wall Street Journal: August 2, 2007. pg. B.1)

ONCE AGAIN, weakness becomes an advantage. Yin creates Yang.

Lambs to the Slaughter

"University of Chicago Graduate School of Business will require applicants to submit up to four PowerPoint slides about themselves for students entering in 2008...

"Michael Flocker, author, Death by PowerPoint [observes], 'It's as if they are actively seeking those who think best inside the box... The use of templates... is the antithesis of creativity.'

"John Fernandes, president, Association to Advance Collegiate Schools of Business [says], 'If Chicago is doing it next year, you'll soon find 10 other schools schools doing it'."

("PowerPoint: Is There No Escape?" Business Week: August 13, 2007. pg. 14)


WHY only four? Baaa!

In Six Sigma We Trust

"It didn't take Robert Nardelli long to find a new job.

"Running Chrysler for private-equity firm Cerberus Capital Management probably is a good position for Mr. Nardelli... But Mr. Nardelli's enthusiasm for the management systems he used in an even earlier job at General Electric might slow the Auburn Hills, Mich., car company down.

"One such tool, the Six Sigma approach for defect reduction and process streamlining, didn't work too well at Home Depot. The system is designed to improve quality and wrings costs out of industrial manufacturers like GE. It sounds tailor-made for Chrysler, which already uses similar techniques but still needs to develop high-quality vehicles to lure buyers. Mr. Nardelli's application of it at Home Depot revealed serious drawbacks when applying it to companies with broad retail-distribution arms.

"Six Sigma led Mr. Nardelli to address problems… by trying to optimize revenue per worker. That meant stretching staff and cutting compensation and other incentives. Those moves left Home Depot's orange-smocked legions thin on the ground and led to a decline in customer service, worsening the Atlanta retailer's problems.

"Of course, Six Sigma may help Chrysler improve design and manufacturing. But like Home Depot, the auto maker depends on a far-flung sales force. Mr. Nardelli may have an even harder time optimizing these relationships…

[So], "Cerberus's choice remains a bit odd... Bringing in a new boss with a history of ticking off workers could… impede Chrysler's ability to secure the concessions it needs. For Cerberus, that is a gamble."


(“breakingviews.com / Financial Insight: Can Nardelli Help Chrysler?; Management Tools Used At Home Depot and GE May Not Serve Car Maker.” Wall Street Journal: August 7, 2007. pg. C.12)


GAMBLERS love numbers (see below too... ). The trembling cling to their cult. Stay in touch.

Remember What Six Sigma Did to 3M?

"We've had management by objective and total quality management. Now it's time for the latest trend in business methodology: management by data.

"The success of enterprises as diverse as Harrah's Entertainment, Google, Capital One Financial and the Oakland A's has inspired case studies, books and consultants promising to help executives outpace rivals by collecting more information and analyzing it better. There is much to be said for the approach...

"Running a complex enterprise can't be reduced to a spreadsheet, however. Even the most detailed statistical analysis has limitations, as [Professor Robert] Sutton acknowledges.

"For one, conditions may change, rendering the analysis misleading. Thomas H. Davenport, a management professor at Babson College and co-author of 'Competing on Analytics: The New Science of Winning,' says such change helps explain why so many sophisticated lenders and investors got burned by the downturn in subprime mortgages. For years, default rates followed a predictable pattern based on the borrower's credit score. Last year, that pattern changed slightly and many lenders didn't adjust.

"Jeffrey Pfeffer, Mr. Sutton's colleague and co-author, offers a more insidious pitfall: Managers can be so focused on perfecting today's business that they lose sight of tomorrow's...

"That helps explain why companies seem invulnerable one minute and aimless the next. For a decade, Dell captured an increasing share of sales and profits in the PC industry by mastering supply-chain logistics. But Dell couldn't diversify its business, making it vulnerable once Hewlett-Packard matched its expertise.

"The real trick, then, is to combine these skills, gaining advantage by analyzing today's problems while looking creatively for tomorrow's opportunities. That's a tough combination, like juggling while riding a unicycle."

(“Now, It's Business By Data, but Numbers Still Can't Tell Future.” by Scott Thurm. Wall Street Journal: July 23, 2007. pg. B.1)


THEY SAY, "Find me a left-brainer who's good with their right brain, or a right-brainer who's good with their left, and I'll hire them in a minute." Surely, we can develop our whole selves for balancing both.

Hooray -- I'm Keeping My Day Job!

"India and China produce thousands of engineers and scientists, but that quantity has been achieved at the expense of quality, report Melinda Liu and Sudip Mazumdar in Newsweek International.

"China graduated 600,000 engineers in 2005, and India produces 500,000 graduates in technical fields annually. Those impressive numbers of technical graduates have led some to predict that India and China will become 'scientific superpowers' over the next few decades. However, scant funding and other problems have undermined the value of their degrees. Employers shun many graduates or conduct their own training. Companies also complain that Indian and Chinese universities tend to emphasize rote learning and conformity over creative thinking.

"'Out of the huge number of engineering and science graduates that India produces, only 25% to 30% can be regarded as suitable,' says Kiran Karnik, head of the National Association of Software and Services Companies, an Indian trade group.

"Funding for top teachers and equipment is barely enough to supply the number of engineers and scientists their rapidly growing economies need. Many professors in India have left for the private sector, which can offer $10,000 a month as opposed to the $400 a month that represents an Indian professor's starting salary. A recurring absence of teachers in classrooms led students at the Jalpaiguri Government Engineering College in West Bengal to protest in the streets in May.

"In China, a program to expand college enrollment in the 1990s led to slipping standards, says Prof. Mao Shoulong of Renmin University. 'Once you get in, it's [too] easy to graduate,' he says. Many Chinese universities support themselves by charging tuition. Despite taking in as many students as can fit in cramped dorm rooms, they can't generate enough cash to pay for high-quality equipment, labs and classrooms."

(From Newsweek International -- August 20, 2007 as cited in "The Informed Reader / Insights and Items of Interest From Other Sources.” Wall Street Journal: August 13, 2007. pg. B.7)


Oh, thank goodness! Now we all can go back to business as ususal. (Don't you just love to read news that you love to read?)

Welcome to August

"Just how red-hot is the current worldwide expansion? 'This is far and away the strongest global economy I've seen in my business lifetime,' U.S. Treasury Secretary Hank Paulson declared on a recent visit to FORTUNE's offices. That may come as news to many Americans, whose boom-time memories are stuck in the 1990s, when Silicon Valley was the epicenter of our growth fantasies…

"John Chambers, who last fall opened Cisco's new Globalization Center in Bangalore, seconds the notion that 'this is the strongest global trend' of his career. 'There is a unique balance today,' he says. 'More than half of GDP growth is coming from emerging countries. And yet the developed countries are also doing pretty well. It is something we have never seen before…'

"The last global good time in the 1970s, of course, ended in a nasty bout of double-digit inflation, spawning the worst stock market crash since the Great Depression, plus other horrors, such as the rise of disco. Is that sorry past our future? Not necessarily. But with nervousness rising over everything from Bear Stearns' battered hedge funds to tightening lending standards that could clog the crowded private-equity deal pipeline, let us first explain how one can be, as we are, short-term bearish but long-run bullish on the global growth story.

"When it comes to markets, we hold these truths to be self-evident: (1) It's never different this time, and (2) Every boom leads to financial excesses that spark its undoing. (That's why they're called business cycles.) 'The necessary conditions for a bubble to form are quite simple and number only two,' investor Jeremy Grantham noted in a recent newsletter headlined 'The First Truly Global Bubble.' 'First, the fundamental economic conditions must look at least excellent--and near perfect is better. Second, liquidity must be generous in quantity and price: It must be easy and cheap to leverage.' That pretty much sums up the world we've been living in, a world where prices skyrocketed for Miami condos, Indian stocks, and office towers in Dubai."

(“The Greatest Economic Boom Ever.” Rik Kirkland. Fortune: July 23, 2007. Vol.156, Iss. 2; pg. 120)



YIN AND YANG show us that the seeds of every opposite are found in the heart and strength of every trend. When everyone knows something, nobody knows anything. Head for the hills when "The old rules no longer apply," or "Things are completely different this time." ouch!

Balancing Stress & Resilience

“Glaxo's ‘team-resilience program’ is an example of the innovative approaches some employers are using to combat work-related stress. Experts say job stress and burnout cost businesses hundreds of billions of dollars annually in absenteeism, medical insurance and reduced productivity.

“The Brentford, U.K., pharmaceutical maker says its team-based approach helped reduce work-related mental illness among its employees by 60%, and cut mental-health-related absences by 29%, between 2003 and 2006. In the U.S. alone, Glaxo says the reduced absences saved $1.4 million over those four years...

“Most employers who target stress focus on its effects, by offering counseling, encouraging exercise and giving more flexibility, Ms. Lingle says. Those efforts are helpful, she says, but often don't tackle the causes of stress inside the workplace...

“The program is voluntary. Glaxo says roughly 18,000 of its 110,000 employees have participated -- and the company expects the number to rise.

“Employees on a participating team first complete an anonymous survey that includes questions about potential causes of pressure, such as lack of support, inadequate feedback or scheduling issues. Employees and their managers then discuss the results as a group and look for ways to reduce stress. They repeat the process a year later to see what has changed.

“Dr. Carr says the process often prompts small changes that make a big difference, such as better communication within teams. Other changes are more dramatic. A Glaxo sales group in Puerto Rico agreed to boost the pay of senior sales consultants who mentor junior colleagues. A group in Germany changed how overtime was assigned, allowing employees to bid on the extra hours.

“Ms. Chandler, the newly appointed manager, says her Raleigh, N.C.- based team's half-day session with Mr. Zisek last March helped the employees form bonds and balance resources. She says the publishers, who assemble information for regulatory filings, are now more comfortable asking one another for help.

“Mr. Zisek says that, as the sole manager, he was initially nervous about meeting with four employees simultaneously. But he says most of the feedback was positive.

“The team-resilience program is ‘more than just a way to manage stress, it's a way to make teams more effective,’ says Ann Kuhnen, Glaxo's vice president for U.S. employee health management.”


(“Theory & Practice: Companies Aim to Combat Job-Related Stress; At Glaxo, Program Uses Teams as Part of Effort To Improve Workplace.” Carola Mamberto. Wall Street Journal: August 13, 2007. pg. B.6)


"Form BONDS and BALANCE resources." Stress is vital to all systems. Systems are networks of bonds. In order to balance, look for root causes -- drivers and the levers of those drivers.

Dilemma and Paradox

“Wall Street has a dream: that the Federal Reserve will rescue financial markets with a sharp cut in interest rates.

“Behind that dream lurks a problem, something financial people call moral hazard.

“Moral hazard is an old economic concept with its roots in the insurance business. The idea goes like this: If you protect someone too well against an unwanted outcome, that person may behave recklessly. Someone who buys extensive liability insurance for his car may drive too fast because he feels financially protected.

“These days, investors and economists use the term to refer to the market's longing for Federal Reserve interest-rate cuts. If investors believe the Fed will rescue them from their excesses, people will take greater risks and, ultimately, suffer greater consequences. Some grumble that the Fed created problems this way in 1998, 1999 and 2003.

“If the Fed were to cut rates now, it certainly could help with the current market crisis. The cheaper money would reduce pressure on stock and bond markets by making it easier to buy beaten-down stocks, bonds and other securities world-wide. Wall Street is a powerful lobby in Washington, and its bleating for help can be hard to resist for politicians, whose campaigns often depend on financial contributions from Wall Street figures.

“But if the Fed were to ride to the rescue, the skeptics worry, it would encourage people to speculate even more, creating an even bigger bubble later.

"’You don't want to see the Fed bail out these guys who have made a lot of money. They have made their bed and you want to see them lie in it,’ says a veteran trader at a New York brokerage house. ‘Then again, you don't want to see the economy go into recession.’

“That, in a nutshell, is the choice the Fed's policy makers face today.”

(“Fed Treads Moral Hazard; Step In and Cut Rates Or Stand By and Watch: Whither Helicopter Ben?” E.S. Browning. Wall Street Journal: August 13, 2007. pg. C.1)



QUESTION: Which do you prefer -- the invisible hand, or the heavy hand? So, while balancing our way through, are we in or out of touch?