Of Banks and Crisis

Reading about Obama and his socialist cronies baying for blood of the banks got me thinking once again about the recent financial crisis.

Government tells banks to lend to people who are not credit-worthy. Banks are not sure, so Government decides to guarantee such loans. After all the American dream means at a least an owned house for every individual. No matter if he is a worthless bum. By virtue of being a human being and an American citizen he deserves the loan. Nevertheless, the risky loans demand high interest rates. If Government wants to gamble the money that it has earned so painstakingly from tax-payers, who are banks to interfere? Besides, getting interest rate reserved for junk bond while holding Government backed AAA+ investment was too good to let go I guess. However, like the proverbial mosquito who drinks so much blood that it is unable to fly, reality caught up with the banks and the Government. Of course the Government cannot be wrong, especially as it thinks about people. Didn't it help its citizens to go on a debt-fuelled consumer frenzy by keeping interest rates artificially low? My, it really cares for its people. Especially the tax-payers and savers. So, banks were the devils who created this spectre of mortgage based securities that threatened to swallow the world. But were they the only ones to blame? I guess not.

My question is simple: why should banks lend money to any worthless idiot because the Government wishes it so? And if they are forced to, why cry foul if they manage to take advantage of it? That is what you get when two looters play chess with each other. Might is right, so the Governments escape blame in name of helping people. But let no one delude themselves into thinking that banks could have pulled this one off all alone. I don't think that banks should suffer the price of socialist dreams because I do not believe in socialism. People who expected banks to self-immolate to satisfy their mediocre vote-banks got a well-deserved shock. And, by all means, the people who allowed and accepted such a system in name of social justice have only themselves to blame. It is a world governed by the laws of cause and effect, and everything we do or don't do has consequences. The banks simply turned a cannibalistic system against itself, but they did not invent it.

Built to Last: Underestimating Leadership

I have started reading 'Built to Last: Successful Habits of Visionary Companies' by Jim Collins and Jerry Porras. As the title suggests, the book aims to analyse the habits of visionary companies for the benefit of entrepreneurs, managers, CEOs and other business building professionals. In this, its research methodology is pretty similar to "In Search of Excellence". It differs, however, by the fact that it tries to bring out the successful habits by comparing the visionary companies with good but not visionary companies in the similar sector. I think the book may have some useful insights just because it uses some practical examples and data to assert its beliefs. Nevertheless, I would take what it says with a big pinch of salt.

One of the first assertions that I have read in this book is that one does not need a leader to make a sustainable great company as great companies last much beyond their leadership. Instead, a company that is value-based, can clearly articulate its purpose of existence, find a profitable denominator and implement its philosophy consistently across the board will succeed. Moreover, the author believes that anybody can become a leader.

I find the entire assertion true and childish in equal measure. What the author says is true theoretically, without a doubt. It is akin to a preacher telling us that we all are potentially divine and there is a saint within all of us. It may be a good management policy (or the politically right thing to increase book sales figures) to tell everybody how good and equal they are. But lets face it: human beings are neither same nor equal. Our physical strength, knowledge, capabilities, experience, motivations, morals, beliefs, wisdom and ambition differ. Our faces, finger prints and bodies differ too. Potentially and theoretically everybody can be equal. And theoretically Communism can be the most humane system of governance. We, however, do not live in an ideal world. Hence, the concept of equality is absurd as one can compare only apples with apples. You could, for example, say that one lawyer is better than the other lawyer in the field of intellectual property rights, but to assert that a top lawyer is better, equal or worse than a top athlete is simply stupid unless we can define a common, intelligent and universally acceptable denominator for comparison. Human beings due to their essentially uniqueness are difficult to compare in absolute terms. So, calling them equal is an easy and the wrong way out. In practical terms, everybody is not equal and everybody cannot be a good leader.

Moreover, good leadership is the result of wisdom gained over years and cannot be possibly taught in a three-day workshop. Practical corporate experience or an MBA can possibly help to develop it, but even that is not guaranteed. To cultivate leadership one needs courage, maturity, experience, strong beliefs, patience and the ability to rally people. There is no short-cut to leadership or to grow a company without a leader. He is always the starting point, whose mind and strength will ultimately shape the organization and its future.

I may also add that even Jim Collins was forced to recognize the need for a Level-5 leadership in his other book, Good to Great. The truth remains that only such a leader can create leaders and engineer a self-sustaining process that can carry a company far. A Level-5 leader is indispensable for building a visionary company, as is evident from all the examples given in both the books. Such leaders, like true Level-5 leaders, may shun publicity and die unknown. Nevertheless it does not eliminate the need or importance of such leaders because only such leaders are capable of building a visionary company and can also turn-around a normal company into a great one. Moreover, to assert that anybody can become such a leader is no different from saying that anybody can be Mr. Universe. The hard work, mental discipline and perseverance necessary for it are not laid out clearly enough, to the extent that the need of good leadership has been significantly played down. Without a gardener who sows the seeds properly and takes care of the sapling, chances of having a giant, fruit-bearing tree are downright difficult, if not impossible.