• The Bard CEO
    Posted by on July 10th, 2007 at 7:54 am

    Here’s an interesting article on Shakespeare on Leadership from Wharton@Work, a newsletter from the Wharton School of the University of Pennsylvania.

    Shakespeare on Leadership
    At the battle of Agincourt on October 25, 1415, the young English King Henry V faced extraordinary odds. To make his claim as ruler of France, Henry had crossed the channel to Calais with 10,000 men. In his first battle at Harfleur, he lost 4,000 men. The French army pursued him, with 30,000 to 60,000 men (or more), well armored, well fed, and well rested, with a strong cavalry. Henry chose to stand his ground with his 6,000 men at Agincourt and prevailed against the odds — primarily through his clever strategy and force of leadership.
    During a recent session of Wharton’s The Leadership Journey: Creating and Developing Your Leadership program, executives considered the lessons from William Shakespeare’s play Henry V. Why study Shakespeare? While some managers may be put off by the language of Shakespeare’s plays (“It’s Greek to me,” as the Bard would say), there are three reasons to use Shakespeare to study leadership. First, he offers a window into human nature. Second, he tells the best stories, and stories are critical to leadership. Third, he is a master of language, and leaders need to be effective communicators.
    “To be a great leader, you have to understand people,” said Carol Adelman, who led the session with her husband Ken, founders of Movers & Shakespeares. After distinguished careers in government service, they have conducted sessions on Shakespeare and leadership in diverse business, educational, and government organizations.
    Building Coalitions
    The opening scene of the Wharton session could have been a modern business meeting. A bureaucrat drones on about an obscure legal principle while participants in the meeting stare blankly. In a meeting with the king and English noblemen, the archbishop of Canterbury presents the argument for Henry’s right to govern France. With little discussion, Henry makes his decision to go into battle.
    But before this meeting, Henry astutely had aligned the interests of all the major players. For the nobles, the conquest of France offered access to rich resources and plunder. The clergy, by offering a religious justification for the invasion, gained the king’s support to kill a pending bill in Parliament that would have taken half of church lands and imposed heavy fines. The king himself saw the French campaign as a chance to demonstrate his leadership, secure his hold on the English throne, and make his indelible mark on history. None of these issues is discussed during the meeting, but the work in building coalitions was done beforehand. The meeting is a formality that ensures that everyone has bought into the plan. “It can be a very costly mistake if you don’t do this kind of consensus building,” said Ken Adelman.
    Rising to the Challenge of Leadership
    Taking up the mantle of leadership changes the leader and all his relationships. Prince Hal was known for his drinking with friends Falstaff and Bardolph. But when he took the crown as King Henry V, he needed to rise to this new role. At his coronation, he brushed aside Falstaff (“Get thee gone, old man.”) During his campaign in France, Henry faced a more severe test. Because he hoped to rule France peacefully after the war, Henry had told his soldiers that the penalty for rape and pillaging during the campaign would be death. When his old friend Bardolph was brought to him after taking a pewter goblet from a church, Henry had to choose between his past friendship and his new authority. Henry gave the nod to hang him.
    “What we saw here is holding people to certain standards, holding them accountable,” said Ken Adelman. “How much should organizations hold people accountable to zero tolerance?”
    Attaining a position of senior leadership often changes the leader. US administration leaders expected little change when Anwar Sadat came to power in Egypt. Similarly, Mikhail Gorbachev, a career communist leader in the Soviet Union, and F.W. de Klerk, a proponent of Apartheid in South Africa, were expected to make few changes before they came to power. The world was surprised.
    “All three leaders were in their organizations, but when they got to a position of leadership, they changed. They were no longer cogs in the wheel. They were the wheel now,” said Carol Adelman. “Henry had to learn to be the boss and handle a supervisory role.”
    Strategy and Motivation
    The triumph at Agincourt was a testament to Henry’s strategy and his ability to motivate his followers. Henry’s military strategy turned the strengths of his opponents into weaknesses. The size of the French army meant nothing on the narrow battlefield Henry chose at Agincourt, fringed by thick forests on both sides. Only a small portion of the French could face the British at a given time. The superior French horses and armor were a liability on the muddy battlefield, and Henry erected a set of sharpened stakes to drive the horses back. Henry also lengthened his lances and shifted most of his forces to the longbow. These archers, with a range of three football stadiums, could fire tens of thousands of arrows every minute into the advancing French, killing them before they reached the English lines. By the end of the battle, there were 6,000 French dead and only about 475 English casualties. “Henry shaped the battlefield himself,” said Ken Adelman.
    Even so, before the battle began, Henry’s men were overwhelmed by the odds against them. They knew their young king had lost 40 percent of his army at Harfleur. As the king, in disguise, walked through the camp the night before the battle, he heard the grumbling. The next day, on the eve of the battle, Henry made his famous St. Crispin’s Day speech. He told the men that they did not want more men here to share the glory of their victory. He said they would all be remembered as heroes on this day. He appealed to their camaraderie, as a “band of brothers.” At the end, Henry asked one of the primary doubters if he still wished to have more reinforcements. The nobleman replied, “You and I alone can win this.” Henry connected them to a higher mission but also appealed to their own egos and desire for glory.
    “He expresses passion, emotion, and total confidence,” said Carol Adelman. “He recognizes the people he works with by name and paints a picture of the future, how they will be showing their scars from this battle years later. And he puts himself right there with them as a band of brothers.”
    Henry V offers many other lessons, including how to win over a new partner after a hostile takeover (as he does with the French princess, Katherine). While the stories and plays are hundreds of years old, the leadership challenges are the same ones that are faced by leaders in every age.
    “Shakespeare speaks the language of leadership,” said Carol Adelman. “When you have a crisis, you can’t just stand behind the podium. You need to think about language to inspire people.”

  • Jim Mora Really Ought to Be on Wall Street
    Posted by on July 9th, 2007 at 8:17 pm

  • Looking at J&J
    Posted by on July 9th, 2007 at 2:01 pm

    Johnson & Johnson‘s (JNJ) stock hasn’t done anything in the last five years. What would get me interested in it?
    Well, this for starters.

  • An Inconvenient Heatwave
    Posted by on July 9th, 2007 at 1:40 pm

    I hope you’re keeping cool wherever you are. It’s 97 here in Washington.

  • Pop!: Why Bubbles Are Great For The Economy
    Posted by on July 9th, 2007 at 1:28 pm

    This is long overdue but I wanted to recommend Daniel Gross’ excellent book, Pop!: Why Bubbles Are Great For The Economy.
    Ever since Charles MacKay’s Extraordinary Popular Delusions and the Madness of Crowds, investment bubbles have gotten a bad rap. Gross comes to their defense and convincingly argues that investment bubbles should be recognized as very positive for the economy. They allocate capital quickly, if not accurately. Plus, when the bubble eventually bursts, prices plunge and there’s tons of excess capacity for the second wave of businesses to make the new technology work. This happened with telegraphs, railroads and now with Web 2.0.
    Gross also includes a fascinating observation. Through the years, government has not been an innocent bystander. In fact, its hand has been quite visible. Government has often been a willing participant in the development of new technologies. In 1843, Congress approved $30,000 for telegraph testing and in the 1850s, taxpayers provided one-fourth of all railroad financing.
    It’s easy to dismiss bubbles as some kind of mass hysteria, but in reality, they do a lot of good.

  • The Quarterly Earnings Myth
    Posted by on July 9th, 2007 at 11:44 am

    Today, Moody’s came out with a report that questions the idea that taking a firm private helps the company because it frees it from quarterly earnings reports.
    CNBC just had a segment on the report and they featured the standard debate of a labor guy against a free market think tank guy, but I think this misses the point of the report. Moody’s wasn’t questioning the efficiency of buyouts, but the idea that quarterly earnings reports stifle companies.
    I haven’t seen the report, but I’m not surprised by the findings. The myth of the quarterly earnings ogre is vastly overrated. This is one of those make-believe issues that sweep over Wall Street every few years. Some folks even want to ditch them. My feeling is that if companies find themselves held hostage to quarterly forecasts, then at some level, it’s their fault.
    It’s very easy for management to downplay the importance of earnings reports. The trouble comes when they consistently play them up, then suddenly face a bad quarter. Here’s a Business Week article describing how several years ago, employees at Cisco loaded up boxes on trucks before midnight to boost their earnings. They failed and the stock missed by a penny a share. The stock fell 13%. So who’s at fault? Unlike many investment writers, I have no problem blaming the investing public. But I’ll also fault management for relying so heavily on earnings reports before.
    The idea that a buyout liberates management is just silly. Also, management still has to answer to their new owners. Does anyone believe that the private equity folks are more patient than the investing public?

  • Gold Versus Stocks
    Posted by on July 9th, 2007 at 10:59 am

    Gold bugs like to point out that gold has risen against the major stock indicies. A better comparison, however, is to look at gold versus the Wilshire 5000 Total Return Index (^DWCT), which includes almost all stocks and their dividends.
    Here’ a look at gold (the gold line, right scale) against the Wilshire 5000 (the blue line, left scale). I made it so both scales match at 12 to 1.
    image492.png
    Gold has indeed done well, but stocks have certainly held their own. Plus, you can see how much less volatile stocks are. Gold is down about 10% from its peak of last year. The peak almost perfectly coincided with this New York Times article. I should have known.

  • Biomet’s Earnings Fall
    Posted by on July 9th, 2007 at 9:13 am

    Since the company is headed to go private, this doesn’t matter very much, but Biomet’s earnings took a tumble last quarter:

    Medical device maker Biomet Inc. (BMET) reported a fall in quarterly earnings, hurt by lower sales in spinal and fixation products segments and a charge related to re-negotiation of some distribution agreements.
    The company, which is being taken private by a group of equity firms for $11.4 billion, posted fourth-quarter earnings of $41.5 million, or 17 cents a share, compared with $100.4 million, or 41 cents in the year-ago quarter.
    Excluding certain items, the company earned 39 cents a share compared with 46 cents in the year-ago quarter.

  • The Original Gilligan’s Island Theme Music
    Posted by on July 7th, 2007 at 3:18 pm

  • Today’s Jobs Report
    Posted by on July 6th, 2007 at 11:22 am

    Today’s employment report was another disappointment. The economy created 132,000 jobs last month, which is just about the pace of population growth, perhaps a bit slower.
    The unemployment officially stayed the same at 4.5%, but to be very precise, it climbed from 4.46% to 4.53%.