GE leaves the DOW. Is that market manipulation?

GE leaves the DOW. Is that market manipulation?

It’s an old adage that “What gets measured, gets managed.” I’d like to add, “what gets managed, gets manipulated.”

That adage is usually used to discuss how people are paid. If you pay a bonus based on quarterly results, some people will manipulate the timing of sales to generate low-quality sales so they can get a bonus.

Broader economic measures have a tremendous effect, too. When the political party in power cries, “The economy is doing well/poorly,” they usually are referring to a very, very narrow set of financial measures. Generally “the stock market,” which translates into the Dow Jones Industrial Average, or the S&P 500, or aggregate corporate profits of public companies. Economic news virtually never includes any measure of well-being of individuals, so it’s not too surprising that an economic-indicator-based measurement system will give the well-being of companies a lot of weight.

GE was just booted from the DJIA

I’m genuinely puzzled. GE has been removed from the Dow Jones. This matters because inclusion in an index boosts a stock, since index funds all buy the stocks that are in an index. So GE will lose that boost. But also, it will change the actual DJIA (Dow Jones Industrial Average).

The article says, “The committee that runs the Dow prefers no more than a 10-to-1 ratio between the high and low stocks in the index.”

If something purports to be a measurement, as the Dow Jones Industrial Average purports, it seems like establishing price standards is, you know, simply manipulating that measurement to get the numbers you want.

Yes, the article says that GE had little impact on the DJIA, because its stock price was so low … but isn’t that the point? It had a low stock price, and that price should affect the average as much as the high prices affect the average.

They also say that GE doesn’t represent the economy any more. That argument makes more sense. If you’re purporting to measure the economy, then changing the mix based on the economy, makes sense. I can buy into to some degree, but manufacturing DOES still exist in the US, and wouldn’t GE be our most significant representative of that sector?

What is “the economy?”

How do they decide what “represents the economy.”

Is it simply who has the most money? If so, trash the whole index of companies and simply replace it with today’s measure of the wealth of the top 10 people in the Forbes 500, or the top 10 institutions that hold the most equities.

Since the purpose of the economy is to create jobs and lift up the country as a whole, perhaps the DJIA should more heavily weight the companies according to the number of full-time, individual living-wage jobs they provide for the economy?

What gets measured gets managed, and what gets managed, gets manipulated.

Or perhaps the DJIA should contain only companies that have never been involved in scandals, since surely we don’t want our economic measures to reward bad actors.

If, as the article states, the financial sector are considered one of the major (if not the major) sectors of the economy, then the financial measures they use will have broad implications for us all. If the DJIA no longer contains GE, that will certainly alter a great many actions somewhere, on some plate.

We just won’t know whose, and whether those actions are bad for the economy, or whether they give us some kind of boost. The one thing we can be fairly sure of: when you change what gets measured, you will change what gets managed.

http://money.cnn.com/2018/06/19/investing/ge-dow-jones-walgreens/index.html

6 steps for mastering meeting organization

6 steps for mastering meeting organization

This blog post was sponsored by Adobe Document Cloud.

Meetings can be the bane of our existence! A great many of them are poorly run and useless… but even the useful ones have problems.

Note taking! I take copious notes in meetings. After all, in good meetings, there’s a lot of good stuff that needs to be captured: decisions, their rationale, vendor information, and action items.

Electronics don’t do it. They’re distracting and take you away from the people dynamics—which are often the part that ultimately make or break you. You want your attention on people during a meeting; you need to spot those telltale flinches that signal potential blackmail material. It’s hard to watch the people when you’re trying to discreetly play Civilization 5 at the same time.

Paper lets you keep your attention mainly on people. And I like paper, but it can get disorganized and is hard to find stuff. My solution? A hybrid system that uses both: electronics for reference, paper notes for recording.

Create folders for each project

Give each project its own folder on a cloud service, like Adobe Document Cloud. All documents and resources related to that project goes in that folder. Make that a habit, and you just don’t have to think about it. Everything related to Project X goes in folder X.

When you need to find the secret plans related to Project X, you instantly know your go-to folder: folder X. It’s simple, and very effective if you use it rigorously.

Put background material into the folder

When there are background documents needed for a project or decision, they go in the project folder. While I may take large hardcopy documents to the meeting itself, for anything that’s only a few pages, I quickly scan it using my smartphone with a scanning app like Adobe Scan, then the PDF file goes into the project folder as background material.

Since Adobe Scan has optical character recognition of the scanned documents, it makes the PDF text searchable. When you need to find reference information quickly, rather than flipping through a stack of papers, you can simply do a quick search within the PDF.

I generally put background materials in a subfolder called REFERENCE so they don’t clutter up the main project folder.

Take notes on paper

Remember how you’re going to take notes on paper, so you can be on the lookout for the subtle interpersonal dynamics that reveal the true nature of the power hierarchy? Do it. Take the notes on paper.

When the group makes a decision, note it, and write a big exclamation point next to it. When there are action items, write them in the lower right part of the paper, with a little checkbox next to each one. Now, with a glance, you’ll be able to review your notes and find both the decisions and the action items. Consider using blank, unlined paper if you can write neatly.

Summarize and Scan, Scan, Scan

At the end of the meeting, if you have several pages of notes, you may want to copy all the decisions and action items onto a single page at the end, for quick reference.

Then … scan your notes and save as a PDF using your scanning app. You’ll end up with a single PDF that has an easy-to-use summary page, with all the details saved for the future. You can also use Adobe Acrobat to combine your PDF’s, update notes, and easily share with others on your team.

Name your files for easy retrieval.

Upload the PDF to the project folder, with a filename that starts with the word MEETING and the date in yymmdd format. For example, MEETING 180316 Marketing department.

When you sort the project folder by filename, all meeting notes will be together since they all start with MEETING. They will then be grouped in order by date.

Using a combination of electronic and paper workflow lets you keep your attention where it needs to be at any given time. You use paper when your attention needs to be on the people, and use scanning, project folders, and more to make it neat, easy, and fast to access information when you need it.

Two language tricks that mean they’re b.s.ing you

Two language tricks that mean they’re b.s.ing you

One of the most valuable distinctions you can make about language is to develop insight into active and passive voice. “Mistakes were made” is passive voice. It doesn’t say by whom those mistakes were made. People use passive voice to avoid acknowledging responsibility.

People also deflect responsibility by using words that sound like they refer to something real, but which refer to abstract concepts. Then they talk as if those abstract concepts are somehow active agents.

“Competition increased this year.” No, it didn’t. Customers purchased from other companies, instead of yours. It’s customers where the action lies. When you put the action where it belongs, you can start to gain insight into how you can investigate further. In this case, by calling up a bunch of customers buyers and asking, “why did you buy from Those Other Guys, Inc. instead of us?”

My favorite deceptive language of the day is that “wages aren’t going up as much as expected, given the economy.” But … wages don’t go up or down. Wages just are. The proper formulation is, “managers and employers are not raising wages.” That puts the action (and the responsibility) squarely where it belongs.

Learn to listen carefully to language. You’ll quickly start to realize how much people use it to avoid addressing the real problems they’re dealing with.

Craft strategy from both inside and outside

Craft strategy from both inside and outside

The economic playing field has gotten complicated enough that it’s foolish to step on the field without some idea of how you’re going to win. In sports, you have a playbook, which lists the plays you can make. In business, we call these “tactics.” You also need a strategy, a way to combine those plays so you win the game. While it’s possible to win without a formal strategy, having a good strategy can often give you a leg up. You’ll form the best strategy by looking both inward and outside.

Look inwards to your resources

Looking inwards tells you what you have to work with. Your strategy must deploy your resources to get the most from them. The book Top Management Strategy: What It Is And How to Make it Work by Tregoe and Zimmerman is my favorite book about creating at internal strategy. They list out twelve different ways you can concentrate your efforts.

For example, you may have invented an electric car that you sell to shipping companies. That’s given you expertise in creating electric cars, and you have expertise selling to shipping companies. You can grow your business by concentrating on bringing your technological expertise (electric cars) to new markets. You can also grow your business by developing new products to sell to shipping companies. In the first case, you’re organizing your strategy around your technology. In the second, you’re organizing around a particular set of customers. Which you decide to do is entirely up to you.

When I worked at Babson College in the team formulating the strategy of the school, Babson was ranked the #1 school for entrepreneurship, world-wide. This gave us an explicit decision: do we ignore the ranking, and (try to) build some other brand for the school, or do we concentrate in entrepreneurship. Babson chose to continue building on entrepreneurship. It didn’t have to, however. Making the choice explicit led to initiatives that would never have happened without that self-examination.

Look outwards to the environment

Great resources aren’t enough. You might have the biggest bank account in your industry, but if your competitor also owns your industry’s largest distributor, you’re going to get creamed. Your landscape determines which (if any) of your resources can help you win.

The most famous model for understanding the strategy landscape for crafting your business strategy is Michael Porter’s “Five Forces” model. My favorite is a later extension of Porter’s model, the “value net,” presented in the excellent book Co-opetition by Adam Brandenburger and Barry Nalebuff. With a value net, you look at the world around you: competitors, substitutes, suppliers, customers, complementors, and barriers to entry. You design your strategy taking into account what each part of your value net brings to the table, and how that meshes with your business goals.

For example, your industry might be dominated by two or three suppliers. That gives the suppliers tremendous negotiating leverage, and the ability to cut you out of the market if you don’t agree to their demands. Furthermore, it makes your business vulnerable if one of the suppliers encounters a disruption, since you don’t have many alternatives.

Good business strategy sometimes happens by magic, but you don’t want to bet the farm on Tinkerbell being in the right place, at the right time. Formulate your strategy by deciding how you can best deploy your internal resources given how your industry’s value net looks today. Times change quickly these days, and an integrated approach to keeping your strategy current will keep you at the top of your game.

How to streamline your paper flow while traveling

How to streamline your paper flow while traveling

This blog post was sponsored by Adobe Document Cloud.

I know in my gut that business travel is what drives the paper industry’s profitability. Every step you take ends up producing a receipt, business card, or some important note scribbled on a napkin, in the hope it will become the Next Big Thing. Then you’re supposed to sort out this massive pile of former trees and report it. Yeah, right. Sorting expense report receipts is really high on everyone’s list of “most favorite task, ever.”

Though I often consider smartphones to be drains on productivity, taming the travel paper flow is one place they really shine. I love using “scanning apps”, like Adobe Scan to keep my travel paperwork completely sorted out from the start.

Adobe Scan takes a picture of a document, lets you crop it, and turns it into a fully searchable and editable PDF. You can organize several scans into one PDF document, and organize the PDFs into folders.

Use Scanning to Manage Your Receipts

Save your receipts throughout the day. When you get a receipt, jot down on the receipt what it was for, who you were with, and so on (which you need to do anyway). When you return to your room at the end of the day, you’ll get out all your saved receipts and super quickly deal with them once and for all.

Make a summary page. Total up the receipts into categories—how much you spent on food, how much on transportation, etc. Grab a blank piece of paper, write the date, and the summary of the categories.

Then open your scanning app, and snap a quick scan of the cover sheet with the totals, followed by the receipts. Your app will detect the pages, correct for perspective, and save it all in a PDF document. Include today’s date in the filename.

Voila! You now have a single PDF with today’s receipts already scanned and totaled, with the details noted on each receipt. If you have to fill out a separate expense report later, you’ve already done the totaling by category, and each PDF separates out a separate day. You don’t need to wait until the end of the day to scan your receipts. You can add each new receipt to your existing PDF, and then create your cover page at the end of the day and add it to the start of your file.

Adobe Scan’s optical character recognition makes your PDF searchable by any text mentioned on the receipts. This is a huge plus that you’ll appreciate later. When you need to go directly to an expense, just search for the name of the company on the receipt, and it will pop right up.

Organize by expense category. Depending on your reporting requirements, rather than organizing your scans by date, you might put all the receipts of one type into the same PDF. For example, you might want all your transportation receipts in one document, and all your meal receipts in another.

In this case, the easiest course of action is to sort your receipts as you get them, and save them up to scan them all at once. At the end of your trip, create a cover sheet with each category and its totals, and scan the cover sheet and all the receipts in that category.

Capture maps

Since you’re often in unfamiliar territory—a conference center, hotel, or corporate campus—you need to know how to get around. When you spot a map of the facility, scan it. Often the facility maps are on a wall, or printed in a book that’s inconvenient to carry around. But the filtering included in a scanning app can often give you a good-quality map even if you snap it off the hotel wall or out of a conference book.

Use Scanning for Conference Notes and Directions

You’re often traveling for meetings or learning. Doing a good job means having real engagement, with your attention focused on what’s going on around you, not on wrestling with your technology. If you take notes you’ll learn the material farbetter taking notes by hand on paper. You can keep more of your attention on whoever’s speaking, and you engage more of your brain in learning and participating. So do that! Take your notes on paper. At the top of each sheet, write a few keywords so you can glance at the top of the sheet and know what’s on it.

At the end of a session, scan your notes into a single PDF for the session. You can then pull the scanned sheets into Acrobat to annotate it as needed, adding circles, arrows, highlights, and anything else that will help pull your attention to the most important areas.

If you aren’t using a scanning app to organize your paper flow as you travel, grab one now. Tame your receipts and your business cards, so you can spend more time on substance, and less on administrivia.

Cryptocurrencies for Investors and Entrepreneurs

Cryptocurrencies for Investors and Entrepreneurs

How ICOs and Cryptocurrencies Work for Entrepreneurs and Investors

With Bitcoin and cryptocurrencies all the rage, I was recently invited to participate in an ICO (an “initial coin offering”). Warren Buffett made his fortune by limiting his investments to businesses and investments he understood deeply. That seems sensible, so I’ve been delving into the ICO world to understand if it’s for real, if it’s a scam, or if it’s something genuinely new.

Much to my surprise, it doesn’t seem to be a complete scam. ICOs are a fund-raising play for a business. Coin-based entrepreneurship has aspects of equity, and aspects of … something new. It decouples the value of the organization from profit. If it’s sustainable, coin-based organizations could become a way to create markets whose bottom line is genuine societal value. The “triple-bottom line” could be an actual market reality. That’s exciting!!

Or, it could turn be unsustainable, and a fancy way for unskilled or unethical entrepreneurs to walk away with lots of investor cash and no obligation to do anything with it.

As you’ll read below, while the ICO mechanism has been invented in the context of crypto currencies, there’s no inherent reason that this has to be done with cryptography. The same structures could be put in place in the physical world, without needing to buy into blockchain or virtual currencies.

What I’ve Learned so Far About ICOs

Here’s my current understanding of “coins” and initial coin offerings (ICOs). While the concepts are being developed in the context of crypto currencies, as I mention below, they can be (and have been) implemented in ways that are totally independent of crypto, or even computers.

PLEASE CRITIQUE AND COMMENT! This understanding is about two or three hours old, so it’s my very first attempt to understand.

ICOs make a different bet than stock investments

The ICO model is fascinating. Instead of betting on the success of a company, as you would with a traditional corporation, you’re betting on the creation of a market. The entrepreneur is then pitching their ability to create a market for the coin, which can be done in many different ways, depending on the company issuing coins.

This means that an ICO has two cases to analyze. While a traditional startup only needs to make a business case, an ICO needs to make a case for the creation of the coin market, and a case for the success (however that’s defined) of the organization being funded with the ICO.

There must be a market-making mechanism

The entrepreneur needs to present a compelling case:

  • that their endeavor can create a market
  • that the market created makes sense (that there’s a reason want the coin)
  • that there’s a way coins are exchanged for dollars or other value that is valuable enough that people will want to trade the coins

The primary function of the business being financed with the ICO is to create a market for the coins, rather than to make an economic profit. For example, an organization issuing an ICO may not do anything on an ongoing basis, as long as they can kick-start the market for their coin.

(There’s no inherent reason that any of this has to involve blockchain or crypto, by the way. You could be issuing frequent flyer points that are tracked in a spreadsheet in an “IFFPO” and it would basically be the same thing.)

For example, an airline could simply rename their frequent flyer points as “coins” and sell a bunch of those coins rather than issuing stock. People would want the coins because they could be exchanged for flights. If the only way to fly were by paying in frequent flyer points, then the market for the points would be created by anyone who wants to travel by air. Frequent flyer points would then be convertible to and from dollars based on the price in coins the airline charges for a flight, and the overall market demand for air travel.

But the airline would not rise and fall based on its ability to generate a profit; it would rise and fall based on its ability to keep the market for FFCs boosted. It would then presumably pay its employees in FFCs, which they could convert to cash.

Coin-based financing may resemble ongoing equity financing

This scenario resembles a company that is financing itself on the strength of its equity, by selling stock to pay any ongoing expenses, rather than financing itself on its underlying business fundamentals.

For an airline, which needs to pay salaries and has high ongoing expenses, it probably wouldn’t work. But as Amazon shows, a company can consistently generate lackluster business results and have its “coins” (shares of AMZN stock) continue to be valued quite highly.

Coins can fund one-time projects as long as they create ongoing markets

The thing about coins is that the organization that did the ICO might not be an ongoing business at all, but a one-time fund raise, as long as it kick starts the market. For example, if the coins created are done so as the only currency that can be used to access some resource, like time on the Hubble telescope, then one organization can create the coins and the protocol that requires them, while completely separate organizations accept the coins and thus generate demand for them.

[One historical example that comes to mind is the currency of green stamps, which survived for decades but eventually failed. An ICO could be likened to an Initial Green Stamp Offering.]

Coins dilute … the market

Coins are like equity in that issuing additional coins dilutes the value of the coins already in circulation. The one ICO I’ve seen closely puts a cap on the number of coins that can ever be issued, to preserve the coin scarcity. That makes sense for an ICO that finances a one-time, transient organization. But if coins will be used, rather than profit, as an ongoing source of an organization’s funds, then having a hard cap on the number of coins will put a cap on the total amount the organization can raise over its lifetime.

In the social enterprise world, coins could be issued to finance social good, as long as there were some mechanism to drive the demand and market for the coins. Rather than having social enterprise rely on constant begging, a social enterprise could drive demand for their coins by striking agreements with businesses or other organizations to use the social coins as a currency. To fund a social enterprise for years on coins, however, would require a substantial initial ICO or the ability to keep issuing coins when funds are needed, so the coin used for the funding probably shouldn’t be capped.

It’s fascinating! And I have no idea how to value a coin, or whether this will prove to be sustainable in any meaningful way.

Safety warning: if you use Skype, your contacts may now be exposed

A quick public service announcement for anyone who uses Skype. Executives, VCs, journalists, researchers, and anyone who cares about the privacy of their contact list should read this.

I don’t usually post about computer security, but in this case, it seemed quite serious. It’s also the kind of thing we’re used to from Facebook and LinkedIn, that could have very serious consequences given that people use Skype very differently from those social platforms. People use social media with an expectation of public transparency, while many use Skype with an expectation of privacy.

As of a couple of days ago, the new Skype tells other people how many contacts you have in common. It also offers your contacts as potential new contacts to everyone else in your contact book. This is a surprisingly serious privacy breach.

This means if you use Skype for anything where your contact list is sensitive (conference calls with clients, planning a protest over the skyrocketing price of kitty litter, coordinating your monthly meeting of people relax by knitting exciting underwear), your contacts can quite possibly deduce who other contacts are. Furthermore, if they know about this new “feature,” they can make some smart deductions.

For example, you’re a mergers & acquisitions consultant. You are in talks with MergeMe, Inc. A prospect from WeMergeToo calls you. Immediately after you accept their contact request, they start seeing suggestions that they might know the MergeMe Inc CEO. They don’t, but they know they just connected to you —> they can quickly figure out MergeMe Inc is talking with you also.

I also just discovered I can look up a profile of someone I don’t know (they’re neither a contact nor a friend), log out and back in, and Skype will start suggesting their contacts to me as potential contacts of my own. (I can tell because those contacts have the same last name, physical resemblance, etc.) So this can be used by stalkers, bullies, harassers, and people who wish to research someone and learn who they know.

(This feature can be used for much more targeted research. I won’t go into details here. Suffice to say that you can get pretty specific.)

Microsoft’s support page says they’re considering changing this behavior someday. Of course, by that time, much damage will have been done.

I went through and deleted some of my contacts by hand this morning (it takes forever… in a triumph of “good for Microsoft who cares if the user gets screwed” they make it super easy for you to give them your social graph, and super hard for you to take it back). Even deleted, Skype kept suggesting prior contacts to me. That suggests that they continue to keep that data — and probably call history and chat history as well — for use in “helpfully” building their social graph.

Important note: deleting your contact book isn’t enough. If your associates have you in their contact book, someone can still use the same mechanism to figure out the connection.

My reaction was to cancel my Skype account altogether. But because Microsoft cares SO MUCH about me, the best I can do is schedule it to be closed in 60 days. So for the next 60 days, like it or not, my contacts are going to continue to be exposed.

See: the Microsoft Skype support article

Also note Danida_U’s response from Microsoft: there’s no way to disable this short of opting out from being contactable at all, and there are not yet plans to remove the “feature.” They want to make it easier for friends and family to find you. My suggestion: if you want your friends and family want to find you, you tell them your Skype ID. Problem solved.

I recommend http://zoom.us or http://appear.in as alternatives that don’t “help” you by exposing your contacts to the world.

Millennials don’t save? Of course not. Neither would you.

Millennials don’t save? Of course not. Neither would you.

Why are millennials broke? Systems. Not choices.

I recently read an online discussion in which Baby Boomers and Gen Xers resoundingly chastised millennials who don’t save enough for retirement. It seems that instead, millennials are struggling with student debt. The crowd was quick to dismiss the problem as irresponsible millennials spending too much for college degrees that pay too little (e.g. Art History).

Really? Millennials (raised by Boomers and Gen Xers, by the way) are an entire generation of people who simply made bad college choices at historically unprecedented levels? Get real. Remember who chooses to attend college and decide on a major: An 18-year-old with no real world experience, who probably knows nothing about modeling lifetime financial implications of their decisions. Expecting them to be able to choose well is naive. Indeed, many Baby Boomers and Gen Xers made really bad choices. But when they were college age, the system was different. A bad choice, financially, wouldn’t—and didn’t—cripple you for life.

The fundamental economics of education and saving have changed.

That was Then

When Gen Xers were growing up, a college education cost a total of about a year and a half’s salary. MIT four-year tuition was $40,000 before books and expenses. A graduating student could get a job that paid a salary in the $30,000 range.

Furthermore, students could get jobs that paid enough to make a serious dent in student expenses. On-campus student jobs paid about $10, and a 1/4-time job would bring in $5,000 a year. That’s enough to pay half of the tuition bill. Today, student jobs still pay about $10. Needless to say, it won’t be covering half of the tuition bill.

To make up the difference, student loans fill the gap. Student loan interest rates were comparable to rates offered in savings accounts, so once a graduate started saving money, their asset base could compound at about the same rate as their student loans, so their net worth could be at least somewhat stable.

Starting salaries generally paid a living wage (enough for rent, food, utilities, a bit of entertainment, and savings), without the need for multiple jobs. And a college degree was a genuine ticket to a better-than-average job.

This is Now

Today, a college education costs closer to 4 years’ starting salary. MIT tuition is about $184,000.

Debt loads can’t be easily reduced by student jobs. No jobs available to students can make much of a dent in the $46,000/year tuition. Student jobs still pay in the $10-$12/hour range.

A starting salary of, say, $50,000 (higher than many are likely to get) isn’t actually enough to live in many cities while paying down student debt. While saying “move somewhere cheap” sounds attractive, the kind of jobs that make use of a college education are often located in big cities that aren’t that cheap.

Student loan interest rates are much higher than you can get in savings accounts, they aren’t dischargeable via bankruptcy. And the college degree that cost all this money is simply needed to get a job at all. Except from a certain class of top-tier schools, it isn’t a ticket to a comparatively higher salary.

Our Choices are as Bad as Millennials’

Everything I’ve read about Baby Boomers and Gen Xers is that we suck at saving money. We may have been living nice lifestyles, but we’re anything but role models when it comes to good lifetime financial decisions. But unlike millennials, we lived in a time where circumstances gave us decent lifestyles despite our bad choices. And our bad choices will, again, fall on the millennials. Our retirement years will make their middle-age a living hell, as they struggle to deal with an aging population that saved nothing and expects to be supported.

Millennials probably aren’t better at long-term financial planning than the rest of us, but they likely aren’t any worse. They were born into a set of circumstances, however, where the road to success that worked for us—a college education—had changed. That road, itself, costs more, benefits less, and creates circumstances that would be just as devastating for any Gen Xer or Baby Boomer.