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Greed Doesn’t Drive Wall Street

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Day 3 of 21 days with Chuck’s new book.

Greed did not drive the giant Industrialists of the 1800s, nor does it drive companies we love to hate on Wall Street today. It’s something quite different.

As with all empire builders who passed before them, it is about power; money is just a new measure of power. In the Industrial Age, for the first time in history, you could build a fiefdom alongside a government that would not send armies to destroy you, but actually protect your right to do so.

Power To The Few
There is little doubt that most of the big Industrialists, when they were still small, likely ignored some moral or ethical boundaries to begin to accumulate wealth. Greed drives them at first, but once they have experienced wealth, the desire to be powerful is the unique and much rarer driving force behind those few people who want to dominate and crush the competition.

Bernie Madoff may have been greedy when he was a bit player on Wall Street, but very shortly it became about being powerful, well known, and highly influential in elite circles. Giant banks may start out focused on accumulating wealth, but that is quickly replaced with a focus on power and domination. After someone has significantly more than they need, it becomes about power. And power requires winning, beating the other guy.

Kings and Kingpins
The basic motivations of feudal lords, politicians and 21st century Industrialists are identical. For all of them the most intoxicating motivation is to be able to control the lives of other people, which gives them power, control, and prestige. The feudal lord accumulates armies, the politician accumulates votes and the Industrialist accumulates money, all with the same motive – domination of their respective worlds and elimination of potential threats.

Cornelius Vanderbilt was a feudal lord ruling over a fiefdom. He was so powerful he was able to destroy the entire railroad industry by shutting down the Albany bridge, the only rail bridge into New York City, which he owned. Winning at all costs, and the power that came from being on top, was the intoxicating way of life for the Industrialist. And it still is for many business people and politicians who make up the 21st century version of the Industrialist.

Sumner Redstone, the American media magnate, summed up the motivation of the 21st century Industrialists we love to hate, “They don’t think in terms of money, they think in terms of winning. Not some times. Every time.”

You see the same transition from greed to power in criminals. Small criminals may be greedy, but big criminals are motivated by power. When the Colombian super-cartel was broken up in 2012, the top three leaders, who were worth hundreds of millions each, were all found living in modest city apartments, working out of cafes, driving regular cars, and essentially living regular middle class lives. Living modestly was what made it hard to find them. When asked why they had continued selling drugs for so many years when they couldn’t spend the money, one of them replied simply, “It was for the power.”

Power Through Philanthropy
Virtually all of the big Industrialists of the 1800s gave away staggering sums of money in their later years. But even in their philanthropy they sought to crush the other guy and build a bigger library, concert hall or museum. If they were driven by greed they would have kept their money. But a building with their name on it would continue to give them prestige and a form of power even after death, and help prove to future generations that they won. That was worth more than money in the bank. Power always trumps greed.

Which Big Do You Love?
Big loves big. They have to. Big government and big business may not be fully in synch, but they are co-dependent and DO love key things about each other that will help them both remain in power. Most people find themselves rooting for one Big or the other, without realizing that decades ago both Bigs lost touch with everything small and local.

In the final analysis, both Bigs have a cozy, symbiotic relationship where donations, cronyism, favors, free trips, power, and money are flying in both directions regardless of party affiliation. They understand clearly how much they need each other in order to stay in power.

Small Is Becoming Powerful
But Big is in trouble. The Participation Age, and the ability to share information easily via the internet, is exposing the power-grabbing practices of the Bigs, at a time where returning to small and local community is becoming one of our highest values. In the coming decade, Big will be less and less necessary in our lives, and the advantage will go to the small and local businesses that are in touch with the “small” guy on the street.

Stop Rooting for the Bigs
But we will accelerate the process when we stop whining about the greed of the Bigs, and focus instead on requiring a level playing field that does not concentrate power in the hands of a few and does not favor the Bigs over the Smalls.

Do you love one Big (business or government) more than the other, because you think it will be better for you? Think again. The Bigs aren’t working to help the Smalls, but to continue to increase their own power.

This is a summary of a chapter from Chuck’s new book, “Why Employees Are ALWAYS a Bad Idea (And Other Business Diseases of the Industrial Age)”. Click here to pre-order this new ground breaking book at a discount on IndieGoGo.com until July 28.

The Problem with Big

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Day 2 of 21 days with Chuck’s new book.

Jerry Garcia said, “Too much of anything, is just enough.” But “Big” is one of the core business diseases of the Industrial Age; a very new business solution devised by Industrialists to serve themselves. Big has big problems that Small will never experience.

It took a long time for us to fall in love with Big, in the 1970s, almost at the very end of the Industrial Age. But since then, we’ve become addicted to big. We can’t help ourselves. Big “anything” is just too cool for school.

Why is Big so Big Now?
Big Government has been around a long time, but Big Business as a dominant force is brand spanking new. There are just 167 companies in the world older than five hundred years, and only one of them has more than 100 employees. The rest are Smalls. After thousands of years of running economies on the backs of the Smalls, we now just assume Big is the best and only way to go.

The Problem With Big
Big has special problems that it doesn’t share with Small. Whether it is business, government, dinosaurs, hurricanes, or snowstorms; the really big ones have two intrinsic problems that Small doesn’t have:

1) The bigger they are, the more problems their complexity creates, for themselves and the world around them.

2) The bigger they are, the greater impact their mistakes and problems have on themselves and the world around them.

In 2008, one giant financial institution, Lehman Brothers, collapsed, which created a domino effect, threatening the entire banking system. As a result, in 2009, and for almost two years after, the U.S. economy was stunningly rated by the National Security Agency as the highest threat to U.S. national security, higher than terrorism or any other outside threat. The United States addiction to Big had become our own worst enemy.

Big is Bigger Than Ever
How did the two Bigs (business and government) respond to this internal threat to our nation’s security? Big Government gifted hundreds of billions of dollars to a few giant banks without so much as an I.O.U. Free money with no strings attached. Big government had to do it. Big business was holding the government and the entire country hostage by sheer virtue of its size. The big banks are now all bigger than they were when they were “too big to fail.”

What did the giant banks do with the bailout gift? They put it in their pocket and stopped lending to small business. Small business in America was crippled by this one act which went largely unreported by big media, and is still the largest underlying cause of the slow recovery.

Big Impact
As this shows, the reach of bad decisions by the Bigs can be devastating. When Big does something stupid like Lehman Brothers, the impact is global. When Small does something stupid or intentionally detrimental, it’s no less acceptable, but the scope of the damage is localized and controlled. It’s the difference between the mistaken detonation of a hand grenade or a nuclear bomb. Both are bad, but only one is global in scale.

Big Has a “Get Out of Jail Free” Card
And too often, when Bigs get stupid, they get a pass. In 2012 the U.S. Justice Department found that HSBC, one of the world’s three largest banks, had “spent years committing serious crimes”, regularly laundering money for terrorists and drug cartels. But the Justice Department decided HSBC was “too important to subject them to disruptions”, and shielded them from any criminal prosecution.

Micro-solutions for Micro-problems
Another problem with Big is that it creates macro solutions for micro problems. Even with the best of intentions it is simply too big a task to ask macro-entities to solve local problems. The problem is not the systems, but the size of the systems; the size of business, size of government and the resulting accumulation of power and decision-making into those few hands.

The reason size is a problem is simple. The old adage is that “all politics is local.” The same is true for problems – “All problems are local.” Big never solves local problems.

Size Matters
Does small always work better than big? No. It is easy to find both local businesses and local governments that make self-preserving decisions that aren’t in the best interest of their constituency, just like the Bigs. But because they are small and local, the negative affects are never as damaging.

Returning to local government and local business for answers to our local problems would push as many decisions down the food chain as possible. This is difficult if not impossible for both national politicians and big business leaders to accept, because they would lose control over their own macro-power.

There is a place for both Big Business and Big Government, but experience says we would be better off, and certainly safer as a nation with less of both.

Tomorrow we’ll discuss why greed doesn’t drive Wall Street; it’s something much bigger.

This is a summary of a chapter from Chuck’s new book, “Why Employees Are ALWAYS a Bad Idea (And Other Business Diseases of the Industrial Age)”. Click here to pre-order this new ground breaking book at a discount on IndieGoGo.com until July 28.

You Can Be Small, and Also Be An Industrialist

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Take the Test – Are You An Industrialist?

People think they despise Capitalists, but they’re actually angry at 21st century Industrialists. There are six major values and beliefs of the new Industrialist. You can be a new startup with no employees and get sideways out of the gate with these beliefs. Are you practicing any of the six?

Many of today’s companies, big and small, are simply Industrialists who forgot which century it is. Industrialism is not something that happened in the 1800s. It still dominates a majority of business practices today. Industrialist values can infect a business of any size. Take the test – see if you are an Industrialist.

Value #1 – Motivated to Be Big The number one value of an Industrialist is that they are more motivated by being big than by making a contribution to the world around them. They might talk about adding value, or creating and innovating, but the motivation for doing so would be – to be big. Do you want to create something that adds value to the world around you, or are you more motivated by using existing innovations simply to get big? Capitalists don’t try to be big, they try to be good. And big follows if big is what will help them be even better. If you’re driven by being big instead of being creative and innovative – even if you have no employees, you’re an Industrialist.

Value #2 – Closed Markets The famous Industrialists of the 1800s, did not believe in a Free Market. They believed in a market that would allow them, the elite, to control everything, at the cost of every other business owner’s freedom. The Industrialist’s goal was to destroy everyone else; to be the last man standing in a zero sum game of dog eat dog. Do you invite others into your industry or do you wish they’d stay out? If you’re not welcoming others in with open arms, you’re not about free markets, and you’re in Industrialist.

Value #3 – Resistance to Progress – Status Quo Industrialists are brilliant at creating efficiencies around their present product and their present position in the market. They are fanatically obsessed with squeezing the last dollar of profit out of the present market, and are very aware that the next great invention could likely destroy their power by simply refocusing the consumer on a newer, better product or service. Are you afraid somebody might come up with some new idea that could make your “legacy” system obsolete? If so, you are an Industrialist. Stop running scared and become the guy who creates what destroys your own legacy system.

Value #4 – Destroying Jobs – Industrialists get bigger by acquiring other companies, then stripping them of “redundant” people who the buyer already owns. Capitalists do it more by organic growth based on having been creative, innovative, introducing new products and adding value to their offering, which sells more product and requires that the grow and hire. Are you thinking you’ll grow your way to success by buying up other people’s creativity? If so, you’re an Industrialist. Instead, get creative and innovate your way to “Big”.

Value #5 – Be Users, Not Creators – The Cash Cow Rule
The thing Industrialists are best at is creating cash cows from other people’s inventions. They don’t look for opportunities to create, innovate and push the world forward. They look for a potential cash cow that can be controlled and spun up to great efficiencies, with bigger opportunities to dominate and be powerful. Besides using existing inventions rather than creating new ones, Industrialists also use people, local economies and resources. Are you using the innovation of others and other people to create a cash cow for yourself at the expense of the world around you? If so, you’re an Industrialist (and a really uncreative one at that).

Value #6 – Focus on the Competitor (Destroy, Mimic, or Buy)
Chris Peters, when he was head of Excel Development in the very early years wrote, “We didn’t write Excel to make money, we wrote it for the sheer joy of putting the largest computer software company out of business.” Industrialists worry a lot about what the other guy is doing, because the other guy could end up creating something that will take market share away from their fiefdom. Capitalists are so busy creating and innovating that they have very little time to worry about what the next guy is doing. Are you focused on creating something amazing for the world around you, or are you focused on mimicking, buying, or destroying the “competition”? If so, you’re an Industrialist.

Don’t fool yourself. Industrialists aren’t giant corporations, they are people who have the wrong view of the world around them. How a company starts their journey has a lot to do with their permanent DNA.

How are you starting your journey?

It’s Good To Be The Big

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And Big Wants To Be King.

If a bank was accused of thumbing their nose at regulators for years, systematically breaking the law and knowingly aiding terrorists, they would lose their license, right? Only if they were a small bank. The law doesn’t apply to the Bigs. If this wasn’t happening in America, you would believe these stories were coming out of some corrupt third world kleptocracy.

According to U.S. bank regulators, HSBC (the world’s second largest bank) “spent years committing serious crimes” by knowingly laundering money for terrorists and drug cartels. Regulators said these kinds of crimes should automatically have resulted in the loss of HSBC’s U.S. banking license.

But the bank will not face prosecution. A few weeks ago, Assistant Attorney General Lanny Breuer told the press, “Had the US authorities decided to press criminal charges, HSBC would almost certainly have lost its banking license in the US, the future of the institution would have been under threat and the entire banking system would have been destabilized.”

Smalls Need Not Apply (for special treatment)
But small banks live under a different judicial system. In November 2011, tiny SunFirst Bank in St. George, Utah was put out of business for connections with Internet poker. In 2012, the Feds charged miniscule Abacas bank in Brooklyn with mortgage fraud, after the banks officers themselves proactively reported suspicious activity of one of their loan officers. No bank officers were involved in the problem, and Abacus’ mortgage loans are performing 10xs better the big banks. They’ve been forced out of business by the Feds.

Big Loves Big
One of the illusions is that big business is at odds with big government and vice versa, but more often they recognize the advantage of propping each other up, for the sake of keeping both Bigs large and in charge.

In late 2008, Big Government gifted $850 billion to a very few elite, giant banks without so much as an I.O.U. Free money with no strings attached. Big government said they had to do it because big banks were holding the government and the entire country hostage by virtue of being “too big to fail”. In 2009, the National Security Agency rated our own homegrown giant businesses as our top national security threat, above terrorism.

Let The Show Begin
So the Big politicians huffed and puffed and created Dodd-Frank to ensure they would never be too big to fail again. Within 18 months, those 15 or so giant banks that had been gifted the $850 billion now had a LARGER percentage of the banking industry then before Dodd-Frank. Who did that legislation actually destroy? You guessed it, the small banks.

The Smalls Get the Shaft
A recent report shows the Bigs are buying up the Smalls in 2013 at an accelerating clip. Jim Chessen, of the American Bankers Association, said, “We have seen an avalanche of new regulations, and while the impression was that the legislation was targeted at the largest institutions, the fact is that it’s had a widespread impact on the smallest banks in the country,” Dodd-Frank is making it easier for the Bigs to get bigger by eating the Smalls, who are the roadkill being crushed by the politicians.

This isn’t about banks. GM and decades of other giant failures in many industries have been bailed out of long-term, epically bad management practices, while the Smalls are crushed by big banks and big regulations.

Don’t kid yourself. No one is looking out for Small, regardless of what form it takes. Do you believe all the noise big business makes about hating regulations? (Hint: they help write them to make sure they come out like Dodd-Frank). Or are you a fan of the noise politicians on both sides of the aisle make about loving small business and reining in the Bigs? That rhetoric plays well on the news, and politicians know that most people just don’t check in later to see how it all worked out.

What Can You Do?
1) Stop choosing sides with one or the other of the Bigs. Neither big business or big government (on either side of the aisle) has your best interests at heart.
2) Stop believing them when they say, “we love small business”. They love using it.
3) Become a “Smallist”. There are now two classes of people in America. The Bigs and the Smalls. Those are the two choices left. Which one do you choose?
4) If you choose to be a Small, start demanding that big business and big government stop colluding with each other to get and be Big at the expense of Small.

“Anyone who thinks they are too small to make a difference never went to bed with a mosquito.” Mahatma Ghandi

Your voice matters. Make a difference. Become a Smallist.