Pickup Basketball and Company Crisis, Lenses Into True Colors

(heads up since this post has religious references)

"An entrepreneur shows his true colors in a period of crisis, not in a period when everybody is having success." — Giorgio Armani on the opening of his new $40 million Manhattan store in the middle of the recession.

When I saw this quote in Fortune magazine a couple of weeks ago, I immediately thought of personal experiences seeing people for who they are under intense, competitive athletic contests, such as pickup basketball. The mild mannered guy in my dorm or the well-liked summer intern became complete morons on the basketball court. One of them was a raving lunatic who prompted me to say outloud, "Who are you?"

In some cases you can excuse rude and unsportsmanlike conduct due to ignorance, especially if the offender rarely played basketball. But for those who knew how to play, there was no excuse or cover from the clear lens that pickup basketball provided into the character of people. On the basketball court, tortoise shells disappear and your character is naked for people to see. If someone you knew was already labeled as a prick, playing a few pickup basketball games confirmed these truths and probably enhanced your perception of their character deficiencies. It’s like bad skin in HDTV, pockmarks look like craters and wrinkles like canyons.

The same goes for crisis situations in a company, especially if you’re an owner or executive. The more at risk you feel, the more your raw emotions and character comes out. Are you going to step up and execute or are you going to fade away from the challenge? Are you going to remain a supportive team member or are you going to succumb, pointing fingers and backstabbing your colleagues?

One company I was advising had an executive with a sterling reputation; The ultimate “nice guy” loved by everyone in his past firms. But he never encountered a downturn in his prior companies. When this company came under financial distress, his true colors were revealed. He became like a man in the desert for 40 days without water. Nothing mattered besides his own reputation and stake in the company. Some of the employees were wondering who Mr. Hyde was that was sitting in Dr. Jekyll’s corner office. He shifted his responsibilities to his colleagues as he looked for his next position, which created more distress on the company. The company needed him to step up instead of trying to step out. He left before the company survived and turned the corner from their crisis.

This reminded me of Peter’s denial of Jesus during the intense episode of his arrest. Peter denied his association with Jesus three times because he was fearful of also being arrested and possibly facing death. Peter denied his greatest responsibility and commitment during this time of crisis.

Then he began to call down curses on himself and he swore to them, “I don’t know the man!”

Immediately a rooster crowed. Then Peter remembered the word Jesus had spoken: “Before the rooster crows, you will disown me three times.” And he went outside and wept bitterly.” — Matthew 26: 74-75

Is your company going through a crisis in this downturn? How are you responding? Are you satisfied with your performance? What areas can you improve upon? Are these situations allowing for a period of self-reflection? Would your colleague say these times are bringing out the best in you…or the worst? How do you know that?


Originally posted at InsideWork.

"The Crisis of Credit Visualized"

An old presentation but an excellence one that deserves to be posted. I received a few emails on this from friends and a random person, so most of you have probably seen this. Anyway, Jonathan Jarvis simply did an excellence job on this visualized story, so here it is again.


The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

VentureBeat's Downturn RoundTable

VentureBeat hosted a Downturn RoundTable this evening. Some good insights and information for you entrepreneurs out there. Here are the list of participants:

* John Doerr, Kleiner Perkins
* Ram Shriram, early investor in and founding board member at Google
* Ron Conway, arguably the most prolific Web 2.0 angel investor
* Max Levchin, Slide founder and PayPal co-founder
* Nirav Tolia, Epinions co-founder
* Matt Cohler, Benchmark Capital
* Jason Calacanis, founder of Mahalo
* Kittu Kolluri, New Enterprise Associates
* Toni Schneider, Automattic CEO

I would say a top-level economist was missing here. It would have been great to get a solid overview on the economic markets and how long they see us scraping bottom for. Could be five years, six years, or more. This might change the game plan for startups with only runway for a year. Some coverage on the discussion below.

"John Doerr: 10 ways for companies to stay afloat in rough times" VentureBeat

"VCs Speak On The Economic Downturn: Batten Down the Hatches" TechCrunch (part one)

"Silicon Valley Entrepreneurs: Make Cuts, Stay Stingy, But Never Forget The Dream" TechCrunch (part two)

[video embed temporarily taken down]
(sorry but having robert scoble on the video skin is really disturbing. this is the last time i'm embedding this player on my blog)

A Billion Here, A Trillion There... Excellent Commentary on Current and Future Crisis

Excellent piece from Knowledge@Wharton, "A Billion Here, A Trillion There: Calculating the Cost of Wall Street's Rescue"

Like many experts, Smetters is not as concerned about the current deficit and debt as about the long-term obligations that include monumental sums for Social Security, Medicare and Medicaid as baby boomers age. "The problems that we face right now are trivial -- they are just an appetizer for the big show," he predicts.

Unraveling The Economy

October 2008 saw Sigma Finance — the last of the SIVs (structured investment vehicles) — unravel, dragging 27 billion dollars down with it. The complex debt instruments called SIVs were central to the financial crisis. Sigma was undone when JP Morgan cut the short term funding line. The Sigma fund was managed by the ironically named Gordian Knot Limited of London.

Shakespeare couldn’t have written it better…In fact, Shakespeare makes reference to the knot in the first act of Henry V when he has the Archbishop of Canterbury say:

Turn him to any cause of policy | The Gordian Knot of it he will unloose | Familiar as his garter

Legend has the Gordian Knot securing an ox cart to a temple in the ancient Phrygian city of Gordium — tied to a prophesy that whoever could solve the puzzle would rule Asia Minor. Of course no one could until Alexander studied the problem and came up with a very different solution. Centuries later, Gordian Knot Limited’s activity in SIVs was part of a shadow banking industry so complex that, had it proved sustainable, all its participants may have become the new masters of the universe…a big finale in the dramatic financial play we have been watching at the dawn of the new century.

In one version of the legend, Alexander, seeking to legitimize his effort to conquer the world, goes to Gordium, which is under Persian rule at the time. Alexander is determined to fulfill the prophecy of the Gordian Knot. While wrestling with the problem, he eventually asks his seer if it matters how it is solved. Without a clear answer, he draws his sword and slices the knot in half. Hence the metaphor “cutting the Gordian Knot” which describes a bold and unconventional solution to a complicated problem. Similarly, for all it’s complexity, Gordian Knot Limited’s fund was summarily undone with a swift cut by JP Morgan.

It’s fascinating that that Gordian Knot Limited failed to see the irony in their name. When they structured their risk management approach, they apparently thought they were Alexander. It turns out they were the knot. It’s more ironic — almost prophetic — if you read the last lines on their website:

"Our aim is simply to make money for investors with minimal risk. And if the banking system becomes more efficient as a consequence, that’s good for everyone, and we’re pleased to have played our small part."

The banking system may not have become more efficient in the way they envisioned, but it has been been simplified by the elimination of quite a few players. The notion that a shadow banking system was the innovative solve we were all looking for seems naive in the immediate aftermath of the collapse. Hopefully, we will remember that things done in the shadows are usually done for shadowy reasons…Hopefully we will remember — and put to use — the reminder from Justice Louis Brandeis that Sunshine is the best antiseptic.


Original posted at InsideWork.

Not Only Wall Street But Main Street, Mortgage Brokers, and Real Estate Agents Deserve Blame

Even though I wrote about the loss of perspective Wall Street had during this financial meltdown last week, I acknowledge that they were not the sole cause of our mess.

After reading Dan Wooldridge's "Begin with the Household" where he examines the meltdown at a more granular level I recalled my own experiences beyond Wall Street.

Dan cites Nouriel Roubini:

"So any unsustainable debt problem requires debt reduction. The lack of debt relief to the distressed households is the reason why this financial crisis is becoming more severe and the economic recession - with a sharp fall now in real consumption spending – now worsening."

Then I read The Wall Street Journal's "Bailing Out Ourselves: Bankers weren't the only ones who enjoyed the credit mania."

My memory took me back a little over two years ago when Christine and I were house hunting. Traveling up and down the peninsula (area between San Francisco and San Jose), we encountered several real estate agents, mortgage brokers, mortgage agents, and others related to residential real estate. By the time we moved into our new home, we met with a few real estate agents and mortgage agents who were pushing adjustable rate mortgages (ARM) and interest-only loans on to us.

"We have a great rate for a 5-year ARM. Actually we have this 3-year ARM and you can get more house for your money..."

The real estate agents didn't care if you to spent beyond your means since they make their commission and it was the same with the mortgage agents or brokers. It wasn't just the greed of Wall Street but the greed of Main Street. It was the greed of these key professionals in the residential real estate markets that helped create today's economic meltdown.

It was a blessing that my wife was financially very conservative and both of us are natural skeptics. Also my parents who were more conservative than Christine were insisted the we get a 30-year fixed loan for our new home. Everything turned out well for us, but many were victims (yes, victims) of some greedy real estate professionals.

Startup Trouble is Brewing? How Will The Downturn Affect Silicon Valley?

Lots of posts on how the financial crisis and downturn will affect tech and the startup space. I'm a bit lazy right now, so I won't add my two cents and just list the posts you should check out :)

"How start-ups can survive" by Webware's Rafe Needleman

"(The) Startup Depression" by Jason Calacanis

"My Thoughts On "Startup Depression"" by Fred Wilson

"How start-ups can navigate through the falling dominoes of the economic crisis" by VentureBeat's Dean Takahashi

Democrats Poor Policies and Stonewalling Led to the Financial Crisis

Yes, they are political, but they are informative too. Check it out.

Burning Down The House: What Caused Our Economic Crisis?


Democrats in their own words Covering up the Fannie Mae, Freddie Mac Scam that caused our Economic Crisis

Rep. Gregory Meeks is a tool. Rep. Lacy Clay is a tool. Rep Arthur Davis is a tool. Rep. Barney Frank said nothing was wrong back in 2004. Idiots.

Fannie Mae CEO calling Obama and the Dems the "Family" and "Conscience" of Fannie Mae

Shifting Sands in An Uncertain World... What's Next? Bschool or Startups?

I had a great time with my colleagues tonight during dinner. Interesting and insightful conversations are times to treasure. Eventually we hit upon the current financial crisis. We discuss how this would affect the current workforce. All the layoffs on Wall Street and HP's announcement to cut 24,600 jobs over a three year period we assumed would spark a move towards increased entrepreneurship, business school applications and independent consultants. Some people might consider wholesale career changes and move into education or the nonprofit sector.

I remember when I was graduating from college in 1993. It was a tough economy and the job market was tight. Many of my friends looking for finance and corporate jobs were scrambling. Luckily I was seeking a position in government after graduation.

Then I recalled 2000 when the market crashed to end the dot com boom. Over the next few years, the market tighten to a worse degree than in 1993. Even the top five bschool graduates had difficulties getting jobs. Placement rates hovered around 50%-60% vs. the typical 95% rate after 6 months of graduation. Wall Street went through multiple rounds of cuts and people were rapidly moving out of Silicon Valley.

Now we will enter another difficult period, which could be the most severe I ever experienced in my life. Maybe the most severe that many of us will go through. I assume another major financial institution will collapse in the U.S. and a few overseas. There will be a restructuring of the global financial system and it will be messy.

I got to my hotel room and came across Fred Wilson's post, "Leave Wall Street, Join A Startup", which is a great move. I visited the "Leave Wall Street and Join A Startup" site after reading his post, but most of these jobs weren't relevant to the majority of people at those firms. Anyway, this crisis period might become a boom for some people professional and personally. I hope that most people will survive and do well through all of this.

More from TechCrunch, "The Mess On Wall Street: Four Trillion Dollars Down The Drain"