Emotional Leadership

“All we have to fear is fear itself.” We’ve heard President F.D. Roosevelt’s quote so often, it risks being trite. But I think this was an example of his effort to provide the nation with emotional leadership in a dour time.

All we really have to fear is blind refusal to understand how things work and to use that information to our benefit. Like attracts like. Fear pulls in fear, anger calls anger, joy invites joy: that’s how things in this universe work. In this economic downturn, it is the best time to feel secure and joyful because financial leadership alone is never enough to pull us out of economic melt-downs. We need emotional leadership as well.

If what I hear during this financial crisis is true, psychology and perception play large roles in market ups and downs. People take financial risks, based in part, on how they feel. If it’s true that emotion and perception are so critical, what’s keeping our business and political leaders from providing the emotional leadership necessary to help our financial worlds rebound? Emotion is contagious, positively and negatively. Who will get the ball rolling?

Here’s how it works: positive emotion draws to us more positive circumstances. All you have to do is keep your traps open, be thoughtful about business decisions and (here’s the key) feel the feelings you have when things are the way you want them to be, but feel the positive feelings before things actually become the way you want them. By “traps” I mean the channels you use to receive sustenance from the world around you. Some people call that work or job or sales. That’s fine. We each have ways to receive from the Universe what we need to survive: milk from mother, welfare or subsidies from a parental figure, wages from a job, dividends or profit from your own business(s), profits from sales. Keep your doors open and feel the feelings you want to have because you choose to feel that way. Results will follow.

The emotional leader in a human group such as a business, corporate team or family does not have to be the designated leader on the org chart. It can be anyone, secretary, truck driver or vice president who is willing to make a choice to whistle in the dark, walk on the sunny side of the street or smile when financial reports are turning crimson red. It is possible to be very aware of dire circumstances but be in charge of your emotional reactions.

You’re going to pass time one way or the other. Why not feel good as you go through time? In the meantime, you could be the one who provides critical emotional leadership for your group. All you have to do is allow yourself to experience positive, safe and secure emotions while time passes. In the end, what we really have to fear is letting circumstances determine how we feel. There’s the real fear: being out of control of ourselves. As a leader, you can control how you feel even when you’re tempted to feel out of control. Others around you will pick that up and multiply the effect.

Cheers.

Paul Anderson, Senior Coach

Banking (as we know it) and the Underserved

One of Longitude's longtime clients recently engaged yours truly to run their credit bureau business. It's a great company with a bright future and attracts a great deal of attention from all constituents and sectors of the market. The business primarily serves lenders who successfully provide access to credit for consumers who are underserved or otherwise disenfranchised by traditional financial institutions (read banks) who continue to fulcrum their credit decisioning on traditional 'cut-off' credit scores.

I offer this backdrop only as a broad, abstracted context to the following article on FT.com yesterday on the topic of the poor and their money: http://www.ft.com/cms/s/2/4304f838-f7dd-11dd-a284-000077b07658.html. The author, Tim Harford, also blogs at The Undercover Economist (http://blogs.ft.com/undercover/). I think you'll enjoy his perspective and observations.

Oh One Oh One Oh Nine -- Oh My!

Magical, isn't it? Or is it? This 'new years' morning, you're likely either nursing a hangover induced head ache, or wondering why you didn't get invited to an A-list party last night so you could get one. Ever notice how we seem to shun what we think we don't want, then end up worrying that maybe we should have wanted it in the first place?

I've been scouring the blogs this morning, interested in finding early signs of 'new years' optimism, a change in the direction of consumer confidence or any indication we, as a global community, are interested and willing to do the hard work to get ourselves out of this structural, media encouraged economic funk. As is my nature, I hit the usual payment related sites first, but found mostly retro analysis and review on what happened in 2008. Seems the most highly ranked payment related events last year ranged from the launch of the LL Bean Visa card via Barclay's (go figure!) to more significant happenings like the BofA - WFB payment processing joint venture. The complete list follows if you're interested:

Citi Introduces Extra Cash - New Rewards Program
Bank of America, Wells Fargo Form Payment Processing Joint Venture
Secure Vault Payments - A Bank-Centric Alternative Payment System
JPMorgan Chase, First Data To End Chase Paymentech Joint Venture
PULSE Releases 2008 US Debit Issuer Study
H.R. 5546 - The Credit Card Fair Fee Act of 2008
Finovate Startup - Best of Show Awards
L.L.Bean Chooses Barclays to Launch New L.L.Bean Visa Card
Citi to Raise Credit Card Interest Rates
PayPal Reports Online Consumer Shopping Trends
New Study Finds Declining Credit Card Use in US

For some reason, several really interesting stories didn't make the Top 10 list like the meteoric rise (and equally rapid death plunge) of Revolution Money, and the "against-all-odds and despite-the-mounting-efforts-of-uniformly-uninformed-lefty-so called-consumer-advocates" continued growth in demand for alternative (read non-bank) lending. I guess the incumbent institutional payment theories, myths and legends of what is, and isn't important prevail.

Frankly, I found little fundamental, genuine optimism filtering through the blogosphere on this newest of new year mornings. In my cynicism, I attribute it to the fact that we remain a nation of highly opinionated watcher/reactors -- we're real good at watching what happens, what someone else may have done and reacting to it, mostly by talking about it without examining the fundamental facts behind 'why' and 'what'. Are we increasingly losing the capacity to truly innovate, create, initiate, or god forbid, even commit to working harder in 2009 than we did last year until our 'fortunes' change? Are we taking an honest inventory of reality often enough? Perhaps our core assets and capabilities are more valuable than we believe them to be. Maybe a bit more intellectual self honesty would help us to SEE past 'the past'.

Cognitive dissonance exists abounds in our economic food chain. Will pouring more TARP funds into the system create sustainable growth? It's an EASY answer, but what of the belief that permanent tax cuts across the income spectrum are a better means to stimulate sustained growth in a free market system (http://online.wsj.com/article/SB122757149157954723.html)? Would that be a better use of Americas assets and resources? Is it that we lack the fortitude to do the hard work and make the difficult, but better choices?

Should GM, among other recent examples, get bailout money just because they have a union contract that requires them to pay a forklift driver $85,000 a year? Greg Knox, President of Knox Machinery in Ohio doesn't think so ( http://www.snopes.com/politics/soapbox/knox.asp).

At least Jason Hogg and his Revolution team took stock of the payment realities, stuck their neck out and raised the flag of the really only new payment innovation the landscape has seen since PayPal. That takes more than capital and guts; it takes a core belief, true optimism and confidence that the future not only can, but WILL be a better than the past -- if only through sheer personal determination and hard work.

The recurring evidence says the very keys to making the future condition of our country, and industry, a company or our individual selves better than a past, or present condition are typically right in front of us, things we already have at our disposal. Its the forward vision to SEE how to use those resources differently, and the WILL to change comfortable behavior that propels us forward to a better outcome tomorrow.

So, here's a suggestion: don't make any resolutions this new year; you'll just end up failing yourself before the Super Bowl kick off. Instead, take a quick inventory of the things you, or your company are really good at, your assets and strong points, the qualities people or your customers like most about you. Then, pretend you just read your name, or your company's name in the newspaper under 'Recent Bankruptcy's', and write out a single page on what went wrong. What assets got mismanaged? What opportunities were not pursued because they seemed too risky (but not to your competition)? Which key customers found an alternate source (built or bought) that delivered an equal or better value-to-price ratio? What structural market factor was there all along, but you just weren't willing to acknowledge how critically important it was? What resources or assets should/could have been used more creatively?

See if this little exercise doesn't help clarify your vision just a little. I think the results will be illuminating; if nothing else it will stimulate some good, constructive conversation -- with yourself (if you're honest about it), with your spouse or loved one, and with your professional peers and subordinates. Then, take a risk. Make an innovative move. Go execute a 'blue ocean' strategy. Who knows, it might just make 2009 a truly NEW year for you.

Here's my wish for only the best for you and yours, regardless of what strategy you chose.

Kim

The Payments Meta Blog

My good buddy Scott Loftesness, Founder and CEO of Glenbrook Partners (http://www.glenbrook.com/) a payments strategy consulting firm in THE Bay Area, does some pretty neat things with the distribution of news, updates, information and opinions in the payments business. His personal blog (http://www.sjl.us/) reveals as much of a renaissance man as you're going to find these days -- recipes, personal photography, his world travels and some interesting reading lists, too.

His creativity most recently revealed itself in a helpful tool I call the meta blog, a highly networked feed to more than 25 payments related blogs. Check it out at www.paymentsnews.com/otherblogs-2.html. As always, some (many?) posts are not much more than personal opinion and unsubstantiated rhetoric; others contain insightful, provocative content. Enjoy. And nice work, Scott.

The Inter-connectedness of Seemingly Trivial Things

I recently came across the following piece (www.SuperHub.com/PrietoPaper.pdf) on the vulnerability of tightly coupled systems that can go unidentified for a very long time. What may look like random events or issues can actually be highly coupled.

Take the simple example of a fire in a small building outside of Chicago that disrupted telephone service for much of the country. Why? Because "It seems that most transcontinental land-lines passed through that single building and they were destroyed in the fire." Excuse me? How could somebody not know, or know and not do something about, that vulnerability? And, why did the price of anti-freeze go up 300% a while back? Turns out ethylene glycol was made in only two places in the US and one of them, a small plant in Idaho, burned down with the obvious result.

You'll enjoy this article; it's short and punchy and can help you ask questions that could potentially illuminate a blind spot, or two.

Al-Zawahiri Didn't Care if You Starve .... Neither Does Your Competition

[The following is provided courtesy of Tal Newhart of Parcon Research]

What we seem to be forgetting & why we're in trouble

A comment by T.S. Newhart

A finance journalist, and reader of this occasional newsletter, called last week to ask what I thought about the $700 billion bail out plan. The conversation quickly expanded into a discussion of "What happened?". He was referring to the larger picture, as in 'What happened to us [the United States]?' Basically, he was asking what happened to Chrysler, Wall Street, Main Street, you and me, etc. In fact, as I write this on Monday the Dow is down 400 (four h-u-n-d-r-e-d) points.

Well obviously, it's complex. But I think a lot of it stems from 9/11 which was so classic it now seems grimly inevitable. I wrote about the tactic in a corporate setting in a CorpWar way back in March 2003 (to review go here: Concentration of Force). Al-Zawahiri, one of Osama bin Laden's key strategists, knew the only way to bring us down, arguably the most 'powerful' civilization in history, was to help us bring ourselves down. Aside from our spirit America is also a business and as such we 'behave' like a business. And all businesses have their weaknesses which are too often discernable to our competition (e.g. al-Zawahiri, or picture your own competition-there really is no difference). So al-Zawahiri helped come up with this cheap little plan, pretty crude really, and sent a huge arrow dead center into our economic heart. And, let's face it, it's been pretty rough sailing ever since. And if you don't think so you and I don't live in the same galaxy.

If you think your business is any different you are part of the problem. You need to think better. You need to think stronger. We all work for our stakeholders. We OWE them our best, now more than ever, because things are starting to fall apart. And if we don't give it to them we should be replaced. Period. This is no time for dull, slacker, thinking folks.

I've taken on the role of new business development for ScreeningInterviews.com (technically a spin-off) and have noticed a couple of alarming things. To put this in context the service does screening interviews of a client's "short list" of an open job's candidates and makes those recordings available to management so they can efficiently comment on whether or not they think a candidate would be a good fit to the company. Pretty simple.

Now, managers that use the tool typically love it but, conversely, some really hate it (actually loathe everything about it). When I drill in to understand why, it's typically because "things work well enough as they are". All I can say is stop, RIGHT THERE. This is the kind of thinking that some clever guy in a corporate cave somewhere (a.k.a. your competition, some of whom you probably aren't even aware of) is waiting to exploit. This mindset insists "things are cool enough now, we'll survive". Really? Think again. If you're sitting around thinking your business is some sort of invincible fort I GUARANTEE you somebody, somewhere, is x-raying your walls to find weak spots. They are focusing on YOU, trying to find YOUR Twin Towers. And we all know the potential result.

Another thing I've noticed because of ScreeningInterviews.com is the quality of many of the candidates (the resumes are supplied by the client's HR department or retained recruiting companies-we have no control over what we get). I do some of the interviews myself, and listen to many of the others and I'm often shocked at what I hear. We typically interview 4-5 candidates per position and often 1 or 2, sometimes even 3 of these candidates are pretty poorly qualified for the position (even internal candidates up for internal transfer). Sometimes egregiously so. It's just so vivid in the recording that they can't do the job you have to ask yourself, how did these people get on a short list? Sometimes, of course, the process lets somebody really shine that looks weak on paper (that's great when it happens, by the way), but more often we uncover expensive hiring mistakes waiting to happen. Often their only real skill is knowing how to game the hiring system. Thank god we help weed them out.

Look, you need to impress everybody around you, everybody in your company, that there are barbarians at the corporate gate, because functionally there really are. This is no time for lazy, yesterday thinking because competitors that need to eat are hunkered down trying to figure out how to steal your food. This is capitalism folks. Your competition doesn't care if you starve.Think about it.

Feel free to contact me about http://www.screeninginterviews.com/. It's useful at helping you efficiently identify winners and avoid losers.

TalTal Newhart (e-mail)ScreeningInterviews.com847.462.0632 dd

The WSJ Had It Right

The op ed piece in this Thursday's edition of the Wall Street Journal had it right...calling the federal market intervention plan a 'Wall Street bailout' is just plain inaccurate and a convenient ignoring of the truth. Whatever 'bailing' Washington is willing to do is as much for the benefit of all the home mortgagees who gleefully accepted the low APR, one year ARM at 125% loan to value with no certainty of making the payments unless their home increased in value by 25% a year as it is for any bank or wall street executive. When credit was readily available at record low rates, and the credit card offers kept pouring through the front door with agressive incentive balance transfer rates, these same consumers gladly accepted this 'found money' as if it was their god given American right.

Some how this has all been turned around, and the concepts of personal responsibilty and foresight have been conveniently forgotten. At the risk of sounding a bit Clintonian, "It's the payments, stupid". Non-performing, over valued mortgages are, at the root, the consumers problem. Wall Street doesn't owe Main Street a life preserver; Main Street didn't suffienctly manage their personal financial matters past their own nose. It's not all Bush's fault or those greedy credit pushers on Wall Street, or Freddie or Fannie's problem. Its an American problem, a society whose savings rate has consistently declined over the last 10 years, yet leads the world in the consumption of extraneous luxury goods like personal electronics and high-end purses, the natural result of a self-centric culture consumed with finding someone else to blame when something goes wrong.

The ability to apply small personal disciplines to our daily lives as practical steps toward the creation of an envisioned improved future state is a lost character trait in our culture. After all, we're told if we shop at WalMart we'll "live better", a pithy meaningless promise that subliminally encourages the direct connection between shopping (spending money) and living 'better'. What if WalMart's adds said "Stay at home once in a while and put that $500 you would have spent in our stores toward your mortgage prepayment. Then you'll live better"? Seems almost silly, doesn't it? But, it's our opinion a good bit more personal accountability all around for choices and actions, or the lack thereof, would do our economy good.

On Investing....What's It All Gonna Mean, Anyway?

It used to be if the stock market went down, the liquidated capital had to go somewhere, usually into real estate. If housing and commercial property values started softening, investors sought bonds to even out the trough. And, if corporate bonds or munis took a turn south, there was always foreign exchange, or another sector in the stock market to re-evaluate and hedge. But, today, I wonder "Where's the safe quarter"?

A functional central bank, something which the US didn't have in 1929, and the global nature of capital markets should prevent the US economy from taking a nose dive into the abyss. But the question remains as to where the safe play for investments remains....is it simply under the mattress for a while?

I'd be interested in your thoughts. Longitude generally isn't engaged on investment topics but the swirl of the markets has us talking, and thinking. Clearly, there will be shake out in the payments landscape from this realignment of organizations...I mean, can Lehman really continue to 'prefer American Express' if they're owned by Bank of America? But, there are more profound fundamentals I think we'll see changing over the next several months. What's your view?

Change: We're All For It....As Long As It's Familar!

My son, who is doing Masters work at the Johns Hopkins SAIS School, alerted me to a Brookings Institute forum this week on the "Future of Consumer Payments: a Discussion on Business and Public Policy" (www.brookings.edu/events/2008/0916 comsumer.aspx). Some really smart people were scheduled to speak including Ken Chenault of American Express, Dick Schmalensee of the Sloan Institute and Vijay D’Silva of McKinsey. I would have loved to attend and hear these and other speakers comment on what they see as 'the future' for our industry.

More provacativley, however, I was reminded of how many of these types of forums I've attended over the years seldom include the real game changing agents. Somehow, the Elon Musk's of the industry, who built a huge consumer data base of online transactors by offerring ‘free online checking’ via x.com using what at the time seemed like obscene amounts VC money, don't get the invitation to share their visions. They're just too scary and represent too much change to be included in the intelectual excercise.

Musk wasn't a banking maverick; he was just a maverick who believed he had a better idea about moving value between two parties. If you don't know the story, Musk went on to convert this huge new community of consumers into the world of PayPal, today the single largest global base of monetary transfer. As PayPal came on stream, the traditional networks (Amex, Visa, etc) and their constiuent institutions comforted themselves by repeating “Its only auctions, its only auctions” without acknowleging the true reality of PayPal's ability to seriously change the rules of the game down the road. If, or perhaps more aptly when, PayPal decides to "go retail" it could well represent a massive C-change in the retail payments landscape and potentially shift the control of payments question back toward the payee.

In the end, Chenault and company are admitedly smart guys. But, its also in their personal self interest to not change too much or too fast. Otherwise, they risk disenfranchising themselves and their networks. We all like change, if its something we’re familiar with!

Coach or Crony?

University psychologist and researcher Carol Dweck says the “key to success in life is to adopt a ‘growth’ mindset as opposed to a ‘fixed’ one.'” She goes on to discuss results from her research on “mindsets”: “People with a fixed mindset believe their basic qualities are carved in stone, so they are concerned about making their abilities look good. Those with a growth mindset believe their basic abilities can be cultivated through dedication and education. They are more concerned about stretching themselves.”

A “crony” is a good-ole-boy (or girl) who supports another person’s status quo. Cronies don’t challenge each other. They encourage the old, safe ways and with flattery attempt to make the fixed traits of their associates look good. A coach doesn’t care if you look good or not. The effective coach strives to disrupt the status quo of those he or she works with and make them stretch. The crony makes you wary of challenges, especially if the learning involves the risk of failure. The good coach orients you toward learning and the changes that are necessary to get you from where you are to where you say you want to be, even if that involves the risk of things looking worse before they get better.

Be wary when choosing a coach who’s main technique is that of cheering and excessive praise. There is nothing wrong with encouragement and when used at the proper time, can help to solidify gains and progress. But first we need to make the changes and do the hard work of moving out of old comfort zones. A coach worth hiring knows how to work with growth minded individuals and show them the strategies of change. Then that same coach also knows how to help you maintain the changes you took the risks to make.

Interview the coach you are considering. Determine if that coach uses a fixed mindset or a growth mindset. An easy test is to know if the coach praises effort, strategy and improvement in the people he or she works with or intelligence and talent. Beware the coach who places emphasis on the later because those aspects of a person are fixed.

Paul W. Anderson,

BulletProofCoach.com

Farewell Harley Kid

Our hearts are heavy with the news of the recent passing of Chuck Russell, former CEO of Visa. Chuck was a man of character and integrity, who put the long term interests of the association and its constiuents ahead of his own. Chuck had the gifted soft touch of leadership -- firm but poignant direction and wisdom that only comes with experience. He was a man led by common sense and never relenquished his vision of the great things that could be accomplished if those closest to the customer, the problem or the opportunity were sufficiently empowered. Our sincere condolences go out to his family. He will be remembered always.

Organizational Theory - Spider or Starfish

I recently picked up a copy of Brafman and Beckstrom’s 2006 quintessential work on organization theory. This interesting and quick read confronts the conundrum faced by many growing organizations: as growth in the market forces us to react to a changing landscape, is it better to decentralize and force more self-direction down stream, closer to the market, or continue to rely on a centralized ‘command and control’ approach to ensure consistency between planning and execution.

The rise of social networks, from Craig’s List to Zedge to LinkedIn, create an enormous opportunity to capture in real time the pulse, direction and implications of markets as well as facilitating reactions to new opportunities equally immediate. But, can social networks run a company, deliver online security or ensure the right level of patient care when and where needed? As Brafman and Beckstrom point out, “You certainly don’t want Johnson from seat 28J to decide that right about now is a good time to land” if you’re trying to run an airline.

I found their research entertaining and their core thesis well constructed. And, a good reminder to continue to push decision making to the lowest possible level, which also puts the burden of clear communication on leadership and management. But, I’m interested in your thoughts and perspective. Can ‘headless’ organizations thrive against stiff competition? Can centrally run organizations develop starfish-like qualities in certain divisions or departments and subsequently improve their timing and quality of reactions to market changes? Let me know…post your comments!

Get Real About Mobile Remittances and Banking

TowerGroup recently released a report titled “Disruptive Technology Spawns Market Revolution: The Ascent of Mobile Remittances into the Mainstream which said that "accelerating investments being made in ubiquitous mobile payment platforms will be a disruptive industry force”. As a result according to TowerGroup, “the emerging revolution occurring for sending and receiving remittances may well undercut existing fee structures and traffic volume of incumbent brick-and-mortar money transfer operators, which already appear to be under pressure in this current economic climate."

TowerGroup goes on to suggest the intersection of channel investments in mobile banking and payments by banks is essentially self-serving, and will create the scenario where the combination of mobility and remittances will most directly benefit the banks as they emphasize more growth efforts among unbanked customer segments. “The inevitable convergence of remittances and mobility offers new opportunities for banks to grow this market by making payments faster, more convenient, more secure, and more accessible to a greater number of senders and recipients,” said Virginia Garcia, co-author of the research and senior research director in the Cross-Industry practice.

On the sending side in developed markets, mobile remittances represent an avenue for banks to initiate relationships with unbanked consumers – who are heavy users of both remittance products and mobile phones – with an eye to fueling deposit inflows through later cross-sale of traditional banking products like checking accounts. On the receiving side, mobile remittances will spur evolution of the financial sector in developing countries and economies, so recipients can direct remittances to checking accounts, bill payments, and microfinance applications.

Garcia also recently issued another report examining the overall evolution of mobility in the financial services sector, titled “Transforming Customer Interaction: Mobile Banking Delivers Adoption as Wheels of the Market Align.” As with mobile remittances, mobile banking overall is fast emerging as an indispensable business asset for banks to retain customers and reach new segments (youth, ethnic, unbanked) to secure deposits.

TowerGroup estimates every month until the beginning of 2009, between 150 and 300 banks and credit unions in the United States will sign contracts for mobile banking solutions. Mobile banking will reach close to 6 million users by the end of 2008, and TowerGroup forecasts 42 million US active users of mobile banking by 2012.
“We believe the rise of next-generation mobile banking and payment solutions will forever change banks and payments companies,” said Garcia. “Mobility has the potential to enable timely, relevant, and actionable outreach that will ignite customer engagement unlike any other channel. Ultimately, TowerGroup expects mobile phones will do for financial services what Apple iPods did for music – foster a significant change in the way consumers access services and suppliers deliver them.”

The TowerGroup report on mobile remittances, titled “Disruptive Technology Spawns Market Revolution: The Ascent of Mobile Remittances into the Mainstream,” is co-authored by Charul Vyas, an analyst in the Emerging Technologies practice at TowerGroup.

What are your thoughts? Agree? Disagree? Post your thoughts!