Bring Back Simplicity and Common Sense
In the past few days I have read a number of articles which reinforces my belief that things have gotten so complex that many major organizations and even governments really don't know what is going on and how much risk they have undertaken.
The first article dealt with the mess on Wall Street. It is clear that the "GO BIG/ GO GLOBAL financial institutions, have become so complex that no one really knows what is going on and even the degree of risk they have taken.
The standard, but dull" "debit and credit" logic, got lost in the ingenious ways of booking income and profits, often,"off their balance sheets", so that their leaders really didn't know they were vulnerable. This is a reflection of our times and just bad leadership and management.
Warren Buffet has said it repeatedly, "if you don't understand it then don't invest in it". He christened this type of creative bookkeeping as "weapons of mass destruction" and I agree.
Another article described, how one of Rupert Murdock's affiliates, Harper Collins, is going to establish a new "imprint" that will refuse to allow the bookstores to return books and will not give authors large advances. The article pointed out that publishers print too many books because they get huge orders from the book chains, who then send them back (30-40% of the books are returned).
The book publishing and selling business has also followed the "GO BIG", "Be all things to all people if it sells" and has become complex, it is hard for an author to get published and a reader to find a good book to read. The mass merchant, "all things to all people" mentality has destroyed the small "mom and pop" bookstores where you could go and be waited on by "book lovers" and even find a book that wasn't just being hyped. Today you enter the superstore and it is not clear what it is... it has thousands of books, but often you can find what you want.
I continue to believe that one of the major problems with GE's ability to get its stock price where it should be ($50 a share versus $38) is that the company is so complex and has the obsession to "Go Big/ Go Global" that the investors would prefer to invest in simple companies like Warren Buffet's Berkshire Hathaway and not have to make a career out of finding out what is really going on, as well as the company's real assets and liabilities. This was one of my key points in my book: The Secret to GE's Success (page 249) and in many of my "GEWatcher blogs".
It is clear that even the Federal Reserve is confused since there are so many creative, often financially unsound, instruments. They still have no idea what Bear Sterns is really worth and what its real assets and liabilities are.
I think the world should adopt the Warren Buffet school of management: "keep it simple, invest in what you understand and avoid complexity". It has worked for him, so why would it work for others... maybe the MBA programs should have a "Buffet strategic thinking and investing course or even program."
Bill Rothschild, CEO Rothschild Strategies Unlimited, LLC... who specialize in logical and effective business strategies and implementation programs and consulting...author of Putting It All Together- a guide to strategic thinking and decision making. Recently updated and available on http://www.strategyleader.com/
The first article dealt with the mess on Wall Street. It is clear that the "GO BIG/ GO GLOBAL financial institutions, have become so complex that no one really knows what is going on and even the degree of risk they have taken.
The standard, but dull" "debit and credit" logic, got lost in the ingenious ways of booking income and profits, often,"off their balance sheets", so that their leaders really didn't know they were vulnerable. This is a reflection of our times and just bad leadership and management.
Warren Buffet has said it repeatedly, "if you don't understand it then don't invest in it". He christened this type of creative bookkeeping as "weapons of mass destruction" and I agree.
Another article described, how one of Rupert Murdock's affiliates, Harper Collins, is going to establish a new "imprint" that will refuse to allow the bookstores to return books and will not give authors large advances. The article pointed out that publishers print too many books because they get huge orders from the book chains, who then send them back (30-40% of the books are returned).
The book publishing and selling business has also followed the "GO BIG", "Be all things to all people if it sells" and has become complex, it is hard for an author to get published and a reader to find a good book to read. The mass merchant, "all things to all people" mentality has destroyed the small "mom and pop" bookstores where you could go and be waited on by "book lovers" and even find a book that wasn't just being hyped. Today you enter the superstore and it is not clear what it is... it has thousands of books, but often you can find what you want.
I continue to believe that one of the major problems with GE's ability to get its stock price where it should be ($50 a share versus $38) is that the company is so complex and has the obsession to "Go Big/ Go Global" that the investors would prefer to invest in simple companies like Warren Buffet's Berkshire Hathaway and not have to make a career out of finding out what is really going on, as well as the company's real assets and liabilities. This was one of my key points in my book: The Secret to GE's Success (page 249) and in many of my "GEWatcher blogs".
It is clear that even the Federal Reserve is confused since there are so many creative, often financially unsound, instruments. They still have no idea what Bear Sterns is really worth and what its real assets and liabilities are.
I think the world should adopt the Warren Buffet school of management: "keep it simple, invest in what you understand and avoid complexity". It has worked for him, so why would it work for others... maybe the MBA programs should have a "Buffet strategic thinking and investing course or even program."
Bill Rothschild, CEO Rothschild Strategies Unlimited, LLC... who specialize in logical and effective business strategies and implementation programs and consulting...author of Putting It All Together- a guide to strategic thinking and decision making. Recently updated and available on http://www.strategyleader.com/
posted by TheStrategist @ 6:15 AM
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