Daniel Lubetzky

Jon Stewart’s interview of Jim Cramer earlier tonight was a stunning indictment of the financial sector, the insider chicaneries of Wall Street, the complicity of financial networks like CNBC, and the overall sad state of affairs of corporate America.  See art.

It is scary that the best reporting out there comes from a comedy show, while regular networks and publications have effectively sold out to corporate sponsors.  One starts sounding like a conspiracy theorist or left wing radical, but when you listen to this stuff, it confirms some of the scarier theories!  Just like you are not paranoid if you really are being followed, so too is the case that you are not wrong to suspect Wall Street’s transparency and integrity and to assume insiders are rigging it against ordinary investors.

Here are a couple of samples of good reporting:

Tom Friedman wrote a provocative article about how we have been living our lives and running our economy at the expense of the next generations – and how the environment and the planet will not bail us out.

Peter Thum, the co-founder of Ethos Water (later sold to Starbucks) and I had a conversation a couple weeks along these lines – about how successful new business models will strive to ensure retail, food, entertainment gifts and consumption are sustainable.

The advent of the internet and related electronic worlds and virtual worlds could theoretically provide some clues here – except for the sobering fact that a lot of these seemingly cost-free worlds and avatars actually cost a ton in terms of energy/electricity, storage, etc.  Whoever decodes this will make a huge contribution…

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Thank goodness Ben Stein is an independent thinker who can elucidate why exuberant enthusiasm over a cap-and-trade system is misguided and dangerous. I am afraid we are condemned to this inefficient dreamed artifice, whereas straight taxation of emissions would be far more effective.

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BusinessWeek’s Stacey Perman asked me to share this opportunity with social entrepreneurs:

…BusinessWeek’s upcoming roundup of the most promising social entrepreneurs in the U.S. – those who aim to both turn a profit and solve social problems. We are now in the process of searching for great candidates, and I want to ask for your help.

Please take a look at the criteria below, then complete the http://www.businessweek.com/smallbiz/social_entrepreneurs/poll.html and pass this note along to your colleagues. I also hope that you will include mention of the roundup on your own Web site or newsletter. If you are interested you can certainly nominated Peaceworks for this as well.

What are we looking for? Candidates should be for-profit companies based in the U.S. that are tackling social problems in new and innovative ways here or abroad. Concepts are great, but we do insist that companies that warrant coverage have been in operation for at least one year. The call for nominations begins January 13, 2009 and ends February 20, 2009. When this nomination period ends, our staff and a few renowned members of the business and social enterprise community will narrow the candidates to 20 finalists – each of whom will be profiled on our Web site. Readers will be able vote for the finalist whom they feel holds the most promise and we will announce the top five vote-getters on May 2, 2009.

Again, nominations are being accepted through February 20, 2009 via this http://www.businessweek.com/smallbiz/social_entrepreneurs/poll.html I encourage you to participate and help spread the word. It’s an exciting way to participate directly in identifying and recognizing social entrepreneurs who are changing the world.

Steven Heydt from Elite Island Resorts came up with a creative promotion that not only aligns investors’ depressed moods to the plus of a vacation in his chain, but also landed them broad media coverage, like this story in the New York Times.

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Here is another good article on the misaligned incentives that came about when Wall Street went public.

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Michael Lewis (from "Liar’s Poker") wrote a piece in Portfolio Magazine that is a must reading (this earlier piece is also very good).  It is at once nauseating, chilling, and fascinating to see how our financial system is a house of cards.

A couple years ago I got into a passionate debate with friends from the financial sector about the growing disintermediation between actual products we make in the "real" economy and the derivative products that get packaged and re-packaged and sold – always generating a fee for the financial firms that hawk them – without really creating value.

Michael Lewis explains better than anyone how this came about in the 80′s and how it came about with the current credit crisis.

The saddest thing is that, while there will be some short fixes and a lot of chest-thumping in Congress, by the media, and in the executive corridors, the system is so sick and so rigged by those that benefit from it, that it is unlikely to be structurally fixed.

As Lewis concludes in his piece, it would require that Wall Street firms go back to operating as private partnerships with skin on the game rather than become publicly traded firms where management can pass on long-term risks to shareholders, benefiting from short-term profits even if they are risking the fate of their institutions.  Or it would require enough regulation that really tracks and connects compensation to long-term value creation.

Yet greed and ingenuity are potent combinations.  And the "smart" guys will always find a way to game the system – with your money.

Even as we witness calamitous losses on the market, many insiders are doing quite well for themselves.  They find the way.  They are survivors.  Several of my friends are in this industry.  They are not bad people.  They are just playing by the rules of the system, which banks on our own greed as investors to sustain and legitimate itself.

It is hard not to be tempted to participate in the market once it has been so depressed that it should have nowhere to go but up.  And yet Lewis points out that someone who would have invested in the 80s in the predecessor to Citigroup would have lost more than half the value of the investment – rather accrue growth over a 22 year period!

Buyer beware.

And for the young people out there thinking what to do with their careers – many of whom Lewis laments having misread his book as an alluring tale for an exciting career – find something you can truly CREATE.  There are sooo many opportunities to make this a better world through concrete businesses that truly improve life and society.  There are so many opportunities to make money and do something truly good. To build something that adds value.  Find one that is real.

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Gretchen Morgenson wrote here an excellent piece in the New York Times about how Merrill Lynch executives systematically dismantled all risk-control mechanisms while pursuing unfettered profits, and how this led to the company’s downfall.

Smaller businesses have to similarly navigate between the drive for profits and the need for caution.

Many years ago I realized how important this tension is to the proper management of a company.  Our sales team always wants (as is correct) to sell more, and will complain that the Operations team sometimes won’t grant enough credit to a customer, or will freeze shipments to a customer that is late on its payments, causing sales to slow down. 

Our team managing accounts receivables has the opposite instinct – be conservative, be cautious, and do not ship to delinquent customers till they pay, even if that hurts sales.

A short-sighted entrepreneur will dismantle this protection, and may override its credit department at its own peril.  The temptation is certainly there.  Why aren’t we shipping product to customers that are asking us for it? Isn’t this what we are in business for?

But sales are not real sales unless you are able to get paid.  And while the credit department has to be professional and know how to work with its customers to ensure good relations, steady payments, and steady shipments, it is important to respect the need for these safeguards.

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Here is an interesting article about the new frontier of automated trading. Algorithms tracking and reacting to market moves are no longer ‘fast enough.’ Increasingly, algorithms aggregate raw sentiments from newspapers and blogs and issues orders based on them, bypassing human interpretation.

The system may indeed be at the cutting edge, but it is dangerously susceptible to easy manipulation. You can imagine the next wave of robo-crawlers artificially pumping up a news story designed to highlight a false vulnerability that will depress shares of a sector or stock that the manipulator shorted. Very dangerous.

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From San Antonio Express News on the business of peace:

Yvan Cournoyer, business development manager for H-E-B, said the South Texas grocer had known of Kind bars for some time and began selling them in select stores in 2002. “The bar became more prominent in the energy bar segment,” Cournoyer said. “Last year, it was one of the best sellers for the H-E-B stores that had it. So at the beginning of 2008, we made a strategic decision to bring it to the vast majority.”

…

“So in a few short years, it went from being this obscure product to mainstream,” Cournoyer said. “It’s a very sought after energy bar that tastes great and is very healthy for you. At the same time, there’s a great story behind the Kind company.”

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