Measuring Up

Handouts shouldn't come without extreme conditions

So, now it appears that the real estate development industry is next in line to receive a government bailout. According to today's news this hard hit industry is hoping to take a piece of a new $200 billion package that is also being offered to prop up car loans, credit cards and student loans providers.

Who's next? The landscaping industry? Maybe the taxi cab industry or office cleaners of America will lobby for some much needed funds.

Actually, on a serious note, I have no problem with our government stepping in to stop the excessive bleeding in any private sector US industry at this point. Our economy is in such tatters, if unique financing can help our companies from going under and even bring them back to a level of prosperity in the short term, well... that's just great. When companies start faring better, then employment rates will increase. This will lead to more consumer spending... which can shift us from this "Great Recession" to a more stable business world. And, that's only good.

But, this truly is unique financing. And, let's not forget it. Not since the Great Depression has our government stepped forward in so many ways to stave off bankruptcy in so many industries. And, those companies who are willing to accept these first of a kind handouts, should also be prepared (and forced) to accept the rules that go with it.

For starters, their business leaders need to understand that because the government is essentially saving their companies, the financing should never be used to support the personal compensation (i.e. bonuses) of their executives. Secondly, let's assume that some of these companies are back on their feet and actually faring well in 18 or 24 months. I believe that senior executive compensation should remain modest and bonuses should be non-existent until those investment loans are paid back to our federal government.

We're operating in strange times. Who knows... it's quite possible that some of these companies might end up being partly owned by the government for a very long time. Maybe our pure capitalistic system will actually become one that evolves into one that is quasi government owned. Kind of like many economies have always been in Europe. I'm not sure if ultimately that is good for our system. My guess is that the pure, often unbridled capitalism that has always driven our markets will once again take over once this crisis is averted. And, this will lead to growth, excess and the next crisis in 8-10 years. But, that's a topic for another day.

The point is that companies within many sectors in the corporate world are now begging to stay alive. Many will receive a bona fide hand out (or a real Christmas present) to do so. When this happens, each should be required to wear financial shackles that ensure they equally share in the pain that has trickled down to every level of our society.

Status symbol or just vehicle for transportation?

The Big-3 automakers are still stuck in the middle of no-man’s land. Although Ford has essentially pulled out of the running for government financing, GM and Chrysler could go bankrupt very soon if the current administration doesn’t step in with a rescue plan.

I’ve read/watched many financial experts debate this issue.  The bankruptcy advocates typically have a myopic focus– they believe that this will provide GM/Chrysler with a “clean slate,” allowing them to wipe debt away and renegotiate so many onerous deals with unions, vendors and others that have hurt the companies so badly. The naysayers (on the other hand) seem to spend most of their time hitting the major (and obvious) point that bankruptcy will create a serious domino effect, forcing thousands of suppliers to go out of business. This, in turn, will ricochet back to all the car companies who won’t be able to buy parts for their vehicles. Ultimately, this would create millions of more lost jobs at the worst of times.

Both points of view have merit. Surprisingly, I’ve only read a few articles focusing on what I believe is a critical point in this giant mess– brand appeal.

I remember reading a survey a few years back in Brand Week which asked consumers of all demographic types what is the number one factor in selecting their automobile. More than nine out of ten answered brand appeal (that stuck out in my mind). The survey did a good job of digging deeper by asking these same respondents why brand is so important. The response by most (sorry, I forgot the statistic) was that it made them feel good about themselves as it was perceived to be a status symbol.

Consumer marketers have always understood these points. But, I’m not sure that those who are advocating bankruptcy for GM and Chrysler do. I’ve argued in past blogs that the Big-3 made their messy beds and now we should let each lie in them (by letting those who can’t survive go bankrupt.) But, on the flip side, I also believe that the negative connotation associated with bankruptcy will prove incredibly damaging to a number of mid to higher end automotive brands, especially in this economy.

Think about those who purchase a Cadillac, or more specifically, an Escalade. These consumers are typically urban, affluent and everything they wear, drive or purchase is focused on the status of success. Do you think most Escalade customers will continue their love affair with this brand when it is equated to the exact opposite, failure? I highly doubt it.

Of course, most brands from these manufacturers are designed for middle and lower classes. And, in this economy, price will certainly trump other features. Still, consumers representing all income levels are clearly in the “driver’s seat” when it comes to the car and type of deal they select these days. I think that a bankrupt GM will push many to select a Honda Accord versus a Saturn the next time around. And, the same goes for choosing the Nissan Altima instead of the Chrysler LeBaron if this company fares the same. By allowing these companies to fall into Chapter 11, their brands will be considered by many to be bankrupt as well.

When the trust is gone...

Bernard Madoff led the ultimate deception to cap off what could be the rockiest three month wallop to investor confidence in 80 years.

This pillar of the financial and philanthropic community has ravaged so many unsuspecting clients. Some are among the "who's who" of the rich and powerful. Others are ordinary working people who lost portfolios encompassing their entire hard worked life savings. And sadly, a few are charities who may have to shutter their doors now. While all the details have yet to emerge, one thing is clear. This man may go down in history as the most talented huckster to ever hit Wall Street.

I know a hedge fund manager who was duped by Madoff. He now counts himself among the millions of walking wounded who have been pulverized for one reason or another during this three month stretch. I finally spoke to him yesterday. His sobering comment to me was, "Ed, everyone had the ultimate faith in this salt of the earth man. I would have believed that the Pope would have scammed us before Madoff. Who can we trust now?"

And that's the $64,000 question, isn't it.

Two things are givens. Americans have short memories. And, they tend to be very resilient (probably in part because they do their best to forget those negatives.) But, in the near term, none of this really helps.

The trust is gone. I've heard one typically positive retiree (who lost 40 percent of his savings to the general market plummet) tell me that he is in utter shock. He's glad that he'll never be forced again to deal with our investment cycle. And, he’d never want to be standing in "my shoes" again (he meant 40 years old) because the system just isn't fair. He has lost heart and all faith.

Financial services firms continue to advertise, telling the world they can be trusted. Media consistently churn out articles such as the "5 or 10 steps" people need to take to make money now or retire with security. And, brokers are attempting to regain their composure by confidently telling clients what sectors they need to have their money in because "it will rise again."

But, most people are past the point of listening because almost no one, in any position, is believable today.

So, how can this trust be rebuilt? Well, the obvious answer is that it will take the resurgence of a positive economy (and stock market.) Once that happens, those short memories will fade further as investors are barraged with advice, marketing and sales pitches on how they can once again prosper. Good times breed confidence and the belief in more opportunity.

But until that happens, individual investors need straight, transparent communications from those would be advisors who might normally shy away from these most difficult topics. In some ways, there is no such thing as providing too much disclosure on facts or communications about issues that do (or don't exist) in this tumultuous period. There's an extremely large dose of paranoia running wild right now. Based on the Madoff crisis, that isn't all bad. Advisors who were once "trusted," need to anticipate doubts and open up their world to be believed (all over again) or they may find that many of their clients will terminate accounts and stash their savings in the only place that feels safe right now. Under the mattress.

There’s nothing good about advertising that is forced on us

This morning I was in the middle of some Internet research for a new blog post. Then, three times in a row, I was forced to watch various ads as I clicked onto media sites. I was so annoyed that I changed the topic of choice today.

Instead, let’s discuss the effectiveness of forced advertising on the consumer.

Site number one was Forbes.com. Before I could enter it, a full page Sony ad appeared. Forbes made me watch this dynamic ad for about six seconds. When I realized that it still wasn’t close to being over, I clicked out of Forbes’ web site. I certainly don’t plan on heading back there anytime soon. And, I have no clue what Sony was advertising because I never cared to look. However, I am annoyed with both companies right now.

Site number two was Politico. A streaming America Express video started as I clicked on a link to see the introduction of a particular story. Ironically, American Express’ intro was focused on how valuable my time is. Really? If AMEX truly cared about my precious time, then this financial services company wouldn’t have forced me to watch a commercial that I never asked for.

Finally, site number three was MSN.com.  This time I listened to Chuck tell me about why his financial planners truly listen to my investment concerns. The problem I have with Chuck (Charles Schwab that is) is that his ad impeded me from collecting some quick information before I had to run out of the house to do some errands. So, I clicked off and ran out.

Many media and other online information providers offer free content. The unspoken deal with consumers is that forced advertising is the “small price we pay” to provide us with this wonderful benefit. Forced advertising allows for advertisers to realize more time spent by consumers on their ads and that means the world. But, the obvious reality is that these ads completely work against the brands they are promoting... because this time spent is anything but quality. Most people (like this blogger) are in a hurry and just want to use the Internet to find information that we desire. So, when something unexpected is forced upon us and takes up our valuable time, we become negative. Sometimes we become very negative. Now, why would any company want to change its brand from a being in positive or neutral position into one that is completely negative with a given consumer? It makes no sense.

It’s so ironic. Web 2.0 is completely about the consumer having all the choices (and thus, all the power.) Yet, advertisers who force this strategy completely break all the rules. And, the amazing thing is that I don’t see it stopping any time soon.

The disease of infertility does not follow the Dow Jones average

According to this article in yesterday's Wall Street Journal, women are lining up more than ever before to donate their eggs or become surrogate mothers.

A tough economy has created thousands of mini capitalists because the demand to make babies through these methods has yet to wane. In fact, top candidates can now command upwards of $25,000 to carry a baby for nine months. An egg donor can also generally receive between 3,000 and 8,000 bucks. One San Diego egg bank has advertised a whopping $50,000 reward for any would-be donor who achieved very high SAT scores.

Of course, many of these applicants never become actual donors or surrogates. They have to pass a battery of tests that many would consider too invasive or would create a whole lot of unnecessary turmoil in their lives.

For starters, donors need to be in very good health, the right height, weight and age (between 20 and 30 years old), no history of sexually transmitted diseases, limited travel outside the U.S. and even no sex, drinking, smoking or drug usage is allowed. These tough standards serve to cancel out over 70 percent of those applying. The small percentage of approved donors then have to go through the most unpleasant reality of hormone injections, blood tests and ultrasounds (with surrogates it's nine months of nurturing someone else's kid). Still, money talks now more than ever. And, that's why they are applying in droves.

What I find most interesting here though, isn't the supply of candidates available. No, it's the demand that has me perplexed. I would think that this ultra depressed economy would force many to wait before ponying up the big bucks that these initiatives typically cost. Even in those cases where insurance covers the medical procedures (in select states,) fees to these agencies can be exorbitant. And, I haven't even begun to discuss the very real everyday costs and responsibilities that it takes to care for another child.

It just doesn't make a lot of sense. Net worth across our country (and the world) has plummeted. Millions are (or will be out of work) within the next six months. And, the result is that almost everyone I know is significantly cutting back spending across the board.

Yet, according to one study I found on the Internet, the number of egg donor recipient applications has increased 35 percent in the last 120 days.

Marketers know that when times are bad, consumers cling to products that give them comfort in their home. That's often why "comfort foods" such as potato chips, popcorn and other salty snacks still keep selling well in the worst of times. Could it be true that this comfort category has expanded to include an entirely different type of living product?

Probably not. My guess is that many couples will spend anything they have (including depleting their savings) to have their own baby. Now that the most modern technology allows for this to happen, even depression-like conditions won't impede this evolutionary trend.

Mastering the art of public relations is critical to Big-Three’s survival now

The big three automakers are in a terrible predicament. They can’t sell cars. Their bloated union contracts have forced billions of $$$ of hardship costs on the companies. And, their failure to innovate ahead of the curve has made each come close to complete failure.  Most of the malfunction that exists can be pinpointed on poor management decisions, lack of execution, inability to connect R&D all the way through to sales and other business related issues.

Yet, I find it quite ironic that the current fate of the Big-Three now largely depends upon how savvy each can become operating within a public relations fish bowl. Legislators, investors, consumers, the media and everyone else are all focusing in on every superficial move that each company CEO (and senior management) makes. When the three CEOs showed utter stupidity by each flying their own corporate jet to the first Congressional hearing and then not having any coherent plan as to how the bailout money would be spent, Congress sent them packing. Each looked like the kid who was thrown out of class for goofing off and still isn’t being allowed back in because of bad behavior.

But, it got worse. Much worse. None of the three corporate leaders made any sort of contrite statement during this same trip to Congress. Instead, they blamed their woes singularly on the current financial crisis. This public relations blunder made Congress (and everyone else watching) feel that these three amigos were living in a fantasy world. It also came across as quite arrogant and unbelievable.

Those superficial, yet quite consequential public relations gaffes almost killed all three of these companies. At the very least, they made all of us ridicule the American automotive manufacturers that much more. And, most importantly, made us feel zero sympathy at a time when each absolutely needed to be building up as much public support as possible.

You see, much like what happened before the initial Wall Street bail out, each member of Congress is still very concerned with how his/her constituents will feel about any vote to bail out these fallen titans of business. Yes, to some degree, the economics of the situation will play a key role in their decisions (i.e. how will two million added lost jobs hurt our economy? and even with the new infusion of cash, can these companies really regain any competitiveness?). But, I believe that as public perceptions change, so will the agendas of their legislators. And, that will impact so many decisions to questions that still haven’t been thought through or acted on yet. A few include: How much of a bailout will they receive? For how long will it last? How will they be monitored once the money is provided? What rules and punishments are attached to this taxpayer hand out? Who will be steering the ship once the money is received? What happens when the next CEO makes a stupid PR move?

It’s nice to see that senior management has begun to learn from their earlier PR mistakes (although, there really was no choice.) Each drove hybrids all the way to Capitol Hill. They also admitted that mistakes were made throughout the last few years which led to the current fiasco. And, they came armed with plans on how the proposed bail out money will be spent. I know there will be more PR blunders over the next weeks and months. It’s just an inevitable reality for these companies that aren’t used to being watched 24/7 and never really cared about their own public personas to this degree. But, I hope for their sake that each is scrutinizing every decision and move from a “what will the public think?” standpoint. Or, I do believe that the negative impact of poor public relations could serve to finally take these companies down.

Take your own “medicine”: Get some rest and a good night's sleep

A few weeks back, I was having dinner with some friends/colleagues. One guy (a resident in a New York hospital emergency room) I've known for a while looked simply exhausted. So, I asked him if he was feeling ok. He responded by saying (I'm paraphrasing), "No I'm not sick. It's pretty typical. I've worked 30 hours straight, with just one break in between. I really need to get out of here and just crash."

Everyone knows that doctors-in-training work extra long shifts and are often sleep deprived. So, I asked him the next logical question, "Can you think straight and actually be productive under these circumstances?" His answer definitely caught the attention of our entire table and made us think about how backwards this system is. It was something like, "I'm good until about hour 24 or 25. Then, I begin to question my own judgment on some patient diagnosis. But, sometimes the toughest part is just to read and correctly process the medical charts of each patient."

Yikes!

Clearly, my friend's experience isn't a singular one because US News & World Report just came out with a thorough study which proves that doctors-in-training across the country are far too tired to effectively do their jobs. Conducted by a panel within the Institute of Medicine, the report suggests that those regulations created five years ago which capped the amount of hours young MDs can work in one week (to 80) simply isn't working. Instead, they now recommend that anyone working a 30-hour shift requires a five-hour break for sleep after 16 straight hours of work.

The panel went on to make other recommendations including far more supervision of these young doctors by experienced supervisors and a better overlap of schedules during shift changes (making sure that the patient hand offs aren’t fumbled).

Even with these recommendations, this system is a disaster waiting to happen each and every day (actually, I'm sure those disasters do happen). The reality is that those who go through a 24-30 hour period with limited sleep (like these doctors experience) are sleep deprived. They experience fatigue and this fogs their brain. Studies have shown that most people actually fall asleep at the wheel (when driving) and others have a greatly increased risk of being in a traffic accident.

Think about this type of brain fatigue as a doctor needs to prescribe the right medicine for a life or death injury, or when he is taking part/assist in a surgery where the most delicate touch means everything. Would you want to be the patient in this situation?

This is a system that has been built (like a rock) over time. The quandary is that these residents cut their teeth by spending so much time working in hospitals, learning every aspect of their specialty. And, the economics work for hospitals because they can have fewer doctors, spending more time on many more patients. But, this is the only profession that operates (no pun intended) this way. And, the safety aspects (never mind the quality of living issue) simply don’t work.

We have some 100,000 doctors who are fresh out of medical school now. It's time to toughen up these standards even more. Doctors should follow the advice they might offer their own patients who are over worked, exhausted and stressed out: Take it easy and go get a good night's sleep.

New Yorkers hate "me, myself and I"

Stephon Marbury, the New York Knicks crest fallen star, has shown once again that he is one of the most selfish athletes to ever don a New York sports uniform. Unfortunately for this egomaniacal enigmatic point guard, he's also simply incapable of rebuilding his toxic image, even when the opportunity to shine is smacking him right in the face.

For those who aren't Knicks' fans, Marbury's latest (and most likely last) fall from grace is an important lesson in the importance of being professional and "doing the right thing," even under the most adverse conditions, when emotion and pride are compelling one to do just the opposite.

Here are the facts of this story:

* The Knicks hired a new general manager and coach this year
* The coach (Mike D'Antoni) quickly decided that Stephon Marbury wasn’t in his short or long term plans and ceremoniously benched him (and didn’t even ask him to dress on some days)
* This isn't a surprise because Marbury has a long standing reputation for being selfish and is a career loser with every one of his NBA teams (including one that D'Antoni coached)
* Marbury watched and waited. To his credit, he didn’t complain publicly and "dealt" with the situation. All the while, the Knicks aren't discussing whether they plan to buy Marbury out of his whopping $21 million salary, cut him, or something in between. The Knicks were beginning to look bad, at this point.
* Then the Knicks decided to trade their top guard (Jamaal Crawford) and two other key players. After this move, D'Antoni approached Marbury, telling him that he now needs him to play 25-30 minutes in the next game because they only have eight players eligible on the bench.
* Marbury refused to play.
* The Knicks suspended Marbury for one game because of this. This equals approximately $400,000 in lost compensation for Marbury.

Now, what do you think Mr. Marbury did wrong?

Stephon Marbury is an employee of the New York Knicks (which is owned by Cablevision). He was asked to pull through for his team and go to work on a day when the organization had too few teammates to get the job done. If Mr. Marbury was able to move beyond the resentment and animosity he undoubtedly feels towards his employer, the man could have quite possibly started a brave new road to repair his contaminated image. And, if the embattled point guard actually helped his team to win, well... then this talented player might just have been seen by some as a hero, sacrificing his own ego for the greater good of the team. Imagine that. Maybe, he could even have had a future in New York City.  

But, of course, that was just a dream. Marbury let us all down... again. The irony here is that by making the obviously selfish choice not to play, Marbury really only hurt himself this time. You see, thousands of fans who continue to fight to keep their jobs in this disastrous economy cannot accept the fact that this spoiled, over paid employee simply won't do the professional thing and go to work when called upon (even under the worst of circumstances). They can't understand it, because many of them have to do this very thing each and every day. And, it's safe to say that 99 percent of those who are just "surviving" these times don't make even 5 percent of Marbury's salary.

The other irony is that Marbury will be looking for a new team shortly. It might be a day, a week or maybe he'll be forced to wait until the end of the season, but this once highly touted guard now has to convince some other sucker (uh... that is general manager) that he has the "goods" to lead a professional basketball team. That would mean that Stephon would need to accomplish what we all know now is impossible. He’d need to actually put his own team ahead of me, myself and I.