Today Troy Hunt announced that a collection of 773 million usernames and passwords were released. This release of passwords, dubbed Collection #1, contains usernames and passwords that have shown up on the dark web over the past two or three years. Think of Collection #1 as being a value pack of bundled old password lists.
If you want to find out if your passwords were released, visit his site called https://haveibeenpwned.com. If you elect to enter your email address, this will tell you if it is in the collection and give you more details.
What do you do if you are on the list? Reset your passwords. Use a password manager that will remember your passwords for you to make your life easier when you use a different password at each website from now on.
Now is a great time to enable two-step verification. A basic form of two-step verification is when you enter a username and password, and you receive a text message code to type in. Enable two-step verification on PayPal, LinkedIn, Dropbox, Facebook and every other web service you use. On each website, look for Settings > Security. You may need to dig down, but more reputable sites now support two-step verification, but you must enable the feature.
Some bad news is that, about a week ago, a tool called Modlishka shows how to break two-step verification so it isn’t that secure, but two-step verification is still more secure than a simple username password combination. If it allows, have a website use some other method than texting you a password. Using an app on your phone or calling you via a voice call are options that are often more secure than the text message. Microsoft, Google, and a service called Duo offer these options and more. Having a hardware key is even better unless your laptop users leave the key stored in the laptop case, and their password written on the bottom of the laptop.
The developed countries of the world are in transition from economies based upon ownership to ones increasingly based upon rental or access. As much as any other trend, this will transform economics, consumption and how we live. The concept of ownership is deeply embedded in economic thought, policy and practice and has been for centuries.
This trend first became clear to me some nine years ago in the area of real estate. It was clear that housing starts had dramatically moved from single family homes to multi-unit rentals. The all-time high mark of home ownership in the U.S. was 69.2% in 2004 and was at 68% when the mortgage crisis hit in 2008. The current level of home ownership is 64.3%. It will never again reach the 2004 level.
In the European Union, where the history of ownership is much older, the high level of home ownership was 73.2 in 2008 and is now at 69.2. Again, I think that the old high-water mark will not be met again.
Since the Great Recession, there has been an explosion in rental, subscription or access models across the developed countries of the world. Think first about content. We have moved from purchasing CDs to MP3 files to streaming services such as Spotify. We have moved from purchasing DVDs to monthly streaming subscriptions. Streaming TV services are growing dramatically. It is expected that by 2020 Netflix will have 140 million individual users, Amazon Prime 96.5 million and Hulu 35.8 million. All of these are paid. YouTube still leads overall with 198.7 million users projected by 2020.
The area of personal transportation is where there is a true move from ownership to rental. The average American uses their car 4% of the time. The remaining 96% of the time the owned car is just sitting, depreciating. There are numerous car- sharing services such as Zipcar that allows members to use cars by the minute, hour or day, picking up and dropping off at ever more designated locations. There are emerging platforms that are combining used car dealerships so that used cars can be rented on a monthly basis for $200. A year’s rental of $2,400 is, in most cases, less than the annual depreciation of a new car.
Ever more cities have rental bikes, electric bikes and scooters that allow to pick up at one location and drop off at another. This will move to small cars in many cities.
There are higher end concierge services where one can pay $800-1,000 per month and switch out cars as often as one wants. One can leave a Mercedes at a valet car park, have dinner and come out to get the keys to a pick-up truck. Even top tier car companies such as Mercedes, Cadillac and BMW that sell new cars, are experimenting with subscription models for new cars, with much less contractual restrictions as leasing.
Relative to the sharing economy, people can now rent out their own cars, creating a revenue stream for the 96% of the time they are not driving. An Airbnb for cars.
The next step in driving down individual ownership of autos is the coming age of the autonomous – driverless- vehicles. These will dramatically drive down both the number of cars on the road and the percentage of cars on the road that are owned by individuals. I live is a development that has some 60 houses. This translates to approximately150 people and the same number of vehicles. In the coming age of autonomous vehicles this sized community could be served by perhaps 20-30 driverless cars, going 24 hours a day when not getting recharged at charging stations. Think of always available driverless Uber cars. In fact Uber and other ride share companies are actively developing the fleet concept of such vehicles.
In the developed world, research consistently shows that the Millennials, born 1981-1997, and Digital Natives, born since 1998 are much less materialistic and much more experiential than their parents’ generations. They are the first generations to grow up with a developed sharing economy, where ownership seems odd and sharing and access makes a lot more sense. To these ascendant generations, ownership feels burdensome. The ability to move freely without ownership of “stuff” seems much more prevalent than prior generations. “Keeping up with the Jones” ownership model of post-WWII America is moving more toward bucket lists of experiences.
An entirely other dynamic that is driving this move to access is the growing understanding that the consumption economy is one of the causes of climate change. Every time something is manufactured, some natural resource is used. So, the sharing of things, the using of things to create revenue, the buying of used items rather than new all point to more of a circular economy than a pure growth economy.
Now, take a big step back and view this new access/rental/sharing economic model versus the older ownership model. What one sees is a major disruption of one of the foundational structures of global economies – producing for mass ownership. More people accessing fewer things produced. More people desiring access than constant ownership. This is a huge structural change that will disrupt, distort economies and ultimately could drive GDP numbers globally to contract.
That’s a lot to unpack in 5,000 words, but the short story of what happened over the last 73 years is simple: Things were very uncertain, then they were very good, then pretty bad, then really good, then really bad, and now here we are. And there is, I think, a narrative that links all those events together. Not a detailed account. But a story of how the details fit together.
Since this is an attempt to link the big events together, it leaves out all kinds of detail of what happened during this period. I’m likely to agree with anyone who points out what I’ve missed. My goal isn’t to describe every play; it’s to look at how one game influenced the next.
If you fell asleep in 1945 and woke up in 2018 you would not recognize the world around you. The amount of growth that took place during that period is virtually unprecedented. If you learned that there have been no nuclear attacks since 1945, you’d be shocked. If you saw the level of wealth in New York and San Francisco, you’d be shocked. If you compared it to the poverty of Detroit, you’d be shocked. If you saw the price of homes, college tuition, and health care, you’d be shocked. Our politics would blow your mind. And if you tried to think of a reasonable narrative of how it all happened, my guess is you’d be totally wrong. Because it isn’t intuitive, and it wasn’t foreseeable 73 years ago.
Here’s how this all happened.
1. August, 1945. World War II ends.
Japan surrendering was “The Happiest Day in American History,” the New York Times wrote.
But there’s the saying, “History is just one damn thing after another.”
The joy of the war ending was quickly met with the question, “What happens now?”
Sixteen million Americans – 11% of the population – served in the war. About eight million were overseas at the end. Their average age was 23. Within 18 months all but 1.5 million of them would be home and out of uniform.
And then what?
What were they going to do next?
Where were they going to work?
Where were they going to live?
Those were the most important questions of the day, for two reasons. One, no one knew the answers. Two, if it couldn’t be answered quickly, the most likely scenario – in the eyes of many economists – was that the economy would slip back into the depths of the Great Depression.
Three forces had built up during the war:
Housing construction ground to a halt, as virtually all production capacity was shifted to building war supplies. Fewer than 12,000 homes per month were built in 1943, equivalent to less than one new home per American city. Returning soldiers faced a severe housing shortage.
The specific jobs created during the war – building ships, tanks, bullets, planes – were very suddenly not necessary after it, stopping with a speed and magnitude rarely seen in private business. It was unclear where soldiers could work.
The marriage rate spiked during and immediately after the war. Soldiers didn’t want to return to their mother’s basement. They wanted to start a family, in their own home, with a good job, right away.
This worried policymakers, especially since the Great Depression was still a recent memory, having ended just five years prior.
In 1946 the Council of Economic Advisors delivered a report to President Truman warning of “a full-scale depression some time in the next one to four years.”
They wrote in a separate 1947 memo, summarizing a meeting with Truman:
We might be in some sort of recession period where we should have to be very sure of our ground as to whether recessionary forces might be in danger of getting out of hand … There is a substantial prospect which should not be overlooked that a further decline may increase the danger of a downward spiral into depression conditions.
This fear was exacerbated by the fact that exports couldn’t be immediately relied upon for growth, as two of the largest economies – Europe and Japan – sat in ruins dealing with humanitarian crises. And America itself was buried in more debt than ever before, limiting direct government stimulus.
2. So we did something about it: Low interest rates and the intentional birth of the American consumer.
The first thing we did to keep the economy afloat after the war was keep interest rates low. This wasn’t an easy decision, because a burst of inflation when soldiers came home to a shortage of everything from clothes to cars temporarily sent inflation into double digits:
The Federal Reserve was not politically independent before 1951. The president and the Fed could coordinate policy. In 1942 the Fed announced it would keep short-term rates at 0.38% to help finance the war. Rates didn’t budge a single basis point for the next seven years. Three-month Treasury yields stayed below 2% until the mid-1950s.
The explicit reason for keeping rates down was to keep the cost of financing the equivalent of the $6 trillion we spent on the war low.
But low rates also did something else for all the returning GIs. It made borrowing to buy homes, cars, gadgets, and toys really cheap.
Which, from a paranoid policymakers’ perspective, was great. Consumption became an explicit economic strategy in the years after World War II.
An era of encouraging thrift and saving to fund the war quickly turned into an era of actively promoting spending. Princeton historian Sheldon Garon writes:
After 1945, America again diverged from patterns of savings promotion in Europe and East Asia … Politicians, businessmen and labor leaders all encouraged Americans to spend to foster economic growth.
Two things fueled this push.
One was the GI Bill, which offered unprecedented mortgage opportunities. Sixteen million veterans could buy a home often with no money down, no interest in the first year, and fixed rates so low that monthly mortgage payments could be lower than a rental.
The second was an explosion of consumer credit, enabled by the loosening of Depression-era regulations. The first credit card was introduced in 1950. Store credit, installment credit, personal loans, payday loans – everything took off. And interest on all debt, including credit cards, was tax deductible at the time.
It tasted delicious. So we ate a lot of it. A simple story in a simple table:
Household debt in the 1950s grew 1.5 times faster than it did during the 2000s debt splurge.
3. Pent-up demand for stuff fed by a credit boom and a hidden 1930s productivity boom led to an economic boom.
The 1930s were the hardest economic decade in American history. But there was a silver lining that took two decades to notice: By necessity, the Great Depression had supercharged resourcefulness, productivity, and innovation.
We didn’t pay that much attention to the productivity boom in the ‘30s, because everyone was focused on how bad the economy was. We didn’t pay attention to it in the ‘40s, because everyone was focused on the war.
Then the 1950s came around and we suddenly realized, “Wow, we have some amazing new inventions. And we’re really good at making them.”
Appliances, cars, phones, air conditioning, electricity.
It was nearly impossible to buy many household goods during the war, because factories were converted to make guns and ships. That created pent-up demand from GIs for stuff after the war ended. Married, eager to get on with life, and emboldened with new cheap consumer credit, they went on a buying spree like the country had never seen.
Frederick Lewis Allan writes in his book The Big Change:
During these postwar years the farmer bought a new tractor, a corn picker, an electric milking machine; in fact he and his neighbors, between them, assembled a formidable array of farm machinery for their joint use. The farmer’s wife got the shining white electric refrigerator she had always longed for and never during the Great Depression had been able to afford, and an up-to-date washing machine, and a deep-freeze unit. The suburban family installed a dishwashing machine and invested in a power lawnmower. The city family became customers of a laundromat and acquired a television set for the living room. The husband’s office was air-conditioned. And so on endlessly.
It’s hard to overstate how big this surge was.
Commercial car and truck manufacturing virtually ceased from 1942 to 1945. Then 21.4 million cars were sold from 1945 to 1949. Another 37 million were sold by 1955.
1.9 million homes were built from 1940 to 1945. Then 7 million were built from 1945 to 1950. Another 8 million were built by 1955.
Pent-up demand for stuff, and our newfound ability to make stuff, created the jobs that put returning GIs back to work. And they were good jobs, too. Mix that with consumer credit, and America’s capacity for spending exploded.
The Federal Reserve wrote to President Truman in 1951: “By 1950, total consumer expenditures, together with residential construction, amounted to about 203 billion dollars, or in the neighborhood of 40 percent above the 1944 level.”
The answer to the question, “What are all these GIs going to do after the war?” was now obvious. They were going to buy stuff, with money earned from their jobs making new stuff, helped by cheap borrowed money to buy even more stuff.
4. Gains are shared more equally than ever before.
The defining characteristic of economics in the 1950s is that the country got rich by making the poor less poor.
Average wages doubled from 1940 to 1948, then doubled again by 1963.
And those gains focused on those who had been left behind for decades before. The gap between rich and poor narrowed by an extraordinary amount.
Lewis Allan wrote in 1955:
The enormous lead of the well-to-do in the economic race has been considerably reduced.
It is the industrial workers who as a group have done best – people such as a steelworker’s family who used to live on $2,500 and now are getting $4,500, or the highly skilled machine-tool operator’s family who used to have $3,000 and now can spend an annual $5,500 or more.
As for the top one percent, the really well-to-do and the rich, whom we might classify very roughly indeed as the $16,000-and-over group, their share of the total national income, after taxes, had come down by 1945 from 13 percent to 7 percent.
This was not a short-term trend. Real income for the bottom 20% of wage-earners grew by a nearly identical amount as the top 5% from 1950 to 1980.
The equality went beyond wages.
Women held jobs outside the home in record numbers. Their labor force participation rate went from 31% after the war to 37% by 1955, and to 40% by 1965.
Minorities gained, too. After the 1945 inauguration Eleanor Roosevelt wrote about an African American reporter who told her:
Do you realize what twelve years have done? If at the 1933 reception a number of colored people had gone down the line and mixed with everyone else in the way they did today, every paper in the country would have reported it. We do not even think it is news and none of us will mention it.
Women and minority rights were still a fraction of what they are today. But the progress toward equality in the late ‘40s and ‘50s was extraordinary.
The leveling out of classes meant a leveling out of lifestyles. Normal people drove Chevys. Rich people drove Cadillacs. TV and radio equalized the entertainment and culture people enjoyed regardless of class. Mail-order catalogs equalized the clothes people wore and the goods they bought regardless of where they lived. Harper’s Magazine noted in 1957:
The rich man smokes the same sort of cigarettes as the poor man, shaves with the same sort of razor, uses the same sort of telephone, vacuum cleaner, radio, and TV set, has the same sort of lighting and heating equipment in his house, and so on indefinitely. The differences between his automobile and the poor man’s are minor. Essentially they have similar engines, similar fittings. In the early years of the century there was a hierarchy of automobiles.
Paul Graham wrote in 2016 about what something as simple as there only being three TV stations did to equalize culture:
It’s difficult to imagine now, but every night tens of millions of families would sit down together in front of their TV set watching the same show, at the same time, as their next door neighbors. What happens now with the Super Bowl used to happen every night. We were literally in sync.
This was important. People measure their well being against their peers. And for most of the 1945-1980 period, people had a lot of what looked like peers to compare themselves to. Many people – most people – lived lives that were either equal or at least fathomable to those around them. The idea that people’s lives equalized as much as their incomes is an important point of this story we’ll come back to.
5. Debt rose tremendously. But so did incomes, so the impact wasn’t a big deal.
Household debt increased 5-fold from 1947 to 1957 due to the combination of the new consumption culture, new debt products, and interest rates subsidized by government programs and held low by the Federal Reserve.
But income growth was so strong during this period that the impact on households wasn’t severe. And household debt was so low to begin with after the war. The Great Depression wiped out a lot of it, and household spending was so curtailed during the war that debt accumulation was restricted – that the growth in household debt-to-income was manageable.
Household debt to income today is just over 100%. Even after rising in the 1950s, 1960s, and 1970s, it stayed below 60%:
Driving a lot of this debt boom was a surge in home ownership.
The homeownership rate in 1900 was 46.5%. It stayed right about there for the next four decades. Then it took off, hitting 53% by 1945 and 62% by 1970. A substantial portion of the population was now in debt that, in previous generations, would not – could not – use it. And they were mostly OK with it.
David Halberstam writes in his book The Fifties:
They were confident in themselves and their futures in a way that [those] growing up in harder times found striking. They did not fear debt as their parents had … They differed from their parents not just in how much they made and what they owned but in their belief that the future had already arrived. As the first homeowners in their families, they brought a new excitement and pride with them to the store as they bought furniture or appliances — in other times young couples might have exhibited such feelings as they bought clothes for their first baby. It was as if the very accomplishment of owning a home reflected such an immense breakthrough that nothing was too good to buy for it.
Now’s a good time to connect a few things, as they’ll become increasingly important:
America is booming.
It’s booming together like never before.
It’s booming with debt that isn’t a big deal at the time because it’s still low relative to income and there’s a cultural acceptance that debt isn’t a scary thing.
6. Things start cracking.
1973 was the first year where it became clear the economy was walking down a new path.
The recession that began that year brought unemployment to the highest it had been since the 1930s
Inflation surged. But unlike the post-war spikes, it stayed high.
Short-term interest rates hit 8% in 1973, up from 2.5% a decade earlier.
And you have to put all of that in the context of how much fear there was between Vietnam, riots, and the assassinations of Martin Luther King, John and Bobby Kennedy.
It got bleak.
America dominated the world economy in the two decades after the war. Many of the largest countries had their manufacturing capacity bombed into rubble. But as the 1970s emerged, that changed. Japan was booming. China’s economy was opening up. The Middle East was flexing its oil muscles.
A combination of lucky economic advantages and a culture shared by the Greatest Generation shared – hardened by the Depression and anchored in systematic cooperation from the war – shifted when Baby Boomers began coming of age. A new generation that had a different view of what’s normal and expected hit at the same time a lot of the economic tailwinds of the previous two decades ended.
Everything in finance is data within the context of expectations. One of the biggest shifts of the last century happened when the economic winds began blowing in a different, uneven direction, but people’s expectations were still rooted in a post-war culture of equality. Not necessarily equality of income, although there was that. But equality in lifestyle and consumption expectations; the idea that someone earning a 50th percentile income shouldn’t live a life dramatically different than someone in the 80th or 90th percentile. And that someone in the 99th percentile lived a better life, but still a life that someone in the 50th percentile could comprehend. That’s how America worked for most of the 1945-1980 period. It doesn’t matter whether you think that’s morally right or wrong. It just matters that it happened.
Expectations always move slower than facts. And the economic facts of the years between the early 1970s through the early 2000s were that growth continued, but became more uneven, yet people’s expectations of how their lifestyle should compare to their peers did not change.
7. The boom resumes, but it’s different than before.
Ronald Reagan’s 1984 Morning in America ad declared:
It’s morning again in America. Today more men and women will go to work than ever before in our country’s history. With interest rates at about half the record highs of 1980, nearly 2,000 families today will buy new homes, more than at any time in the past four years. This afternoon 6,500 young men and women will be married, and with inflation at less than half of what it was just four years ago, they can look forward with confidence to the future.
That wasn’t hyperbole. GDP growth was the highest it had been since the 1950s. By 1989 there were 6 million fewer unemployed Americans than there were seven years before. The S&P 500 rose almost four-fold between 1982 and 1990. Total real GDP growth in the 1990s was roughly equal to that of the 1950s – 40% vs. 42%.
President Clinton boasted in his 2000 State of the Union speech:
We begin the new century with over 20 million new jobs; the fastest economic growth in more than 30 years; the lowest unemployment rates in 30 years; the lowest poverty rates in 20 years; the lowest African-American and Hispanic unemployment rates on record; the first back-to-back surpluses in 42 years; and next month, America will achieve the longest period of economic growth in our entire history. We have built a new economy.
His last sentence was important. It was a new economy. The biggest difference between the economy of the 1945-1973 period and that of the 1982-2000 period was that the same amount of growth found its way into totally different pockets.
You’ve probably heard these numbers but they’re worth rehashing. The Atlantic writes:
Between 1993 and 2012, the top 1 percent saw their incomes grow 86.1 percent, while the bottom 99 percent saw just 6.6 percent growth.
Joseph Stiglitz in 2011:
While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall. For men with only high-school degrees, the decline has been precipitous—12 percent in the last quarter-century alone.
It was nearly the opposite of the flattening that occurred after that war.
Why this happened is one of the nastiest debates in economics, topped only by the debate over what we should do about it. Lucky for this article neither matters.
All that matters is that sharp inequality became a force over the last 35 years, and it happened during a period where, culturally, Americans held onto two ideas rooted in the post-WW2 economy: That you should live a lifestyle similar to most other Americans, and that taking on debt to finance that lifestyle is acceptable.
8. The Big Stretch
Rising incomes among a small group of Americans led to that group breaking away in lifestyle.
They bought bigger homes, nicer cars, went to expensive schools, and took fancy vacations.
And everyone else was watching – fueled by Madison Avenue in the ‘80s and ‘90s, and the internet after that.
The lifestyles of a small portion of legitimately rich Americans inflated the aspirations of the majority of Americans, whose incomes weren’t rising.
A culture of equality and Togetherness that came out of the 1950s-1970s innocently morphs into a Keeping Up With The Joneses effect.
Now you can see the problem.
Joe, an investment banker making $900,000 a year, buys a 4,000 square foot house with two Mercedes and sends three of his kids to Pepperdine. He can afford it.
Peter, a bank branch manager making $80,000 a year, sees Joe and feels a subconscious sense of entitlement to live a similar lifestyle, because Peter’s parents believed – and instilled in him – that Americans’ lifestyles weren’t that different even if they had different jobs. His parents were right during their era, because incomes fell into a tight distribution. But that was then. Peter lives in a different world. But his expectations haven’t changed much from his parents, even if the facts have.
So what does Peter do?
He takes out a huge mortgage. He has $45,000 of credit card debt. He leases two cars. His kids will graduate with heavy student loans. He can’t afford the stuff Joe can, but he’s pushed to stretch for the same lifestyle. It is a big stretch.
This would have seemed preposterous to someone in the 1930s. But we’ve spent a half-century since the end of the war fostering a cultural acceptance of household debt.
During a time when median wages were flat, the median new American home grew 50% larger:
The average new American home now has more bathrooms than occupants. Nearly half have four or more bedrooms, up from 18% in 1983.
The average car loan adjusted for inflation more than doubled between 1975 and 2003, from $12,300 to $27,900.
And you know what happened to college costs and student loans.
Household debt-to-income stayed about flat from 1963 to 1973. Then it climbed, and climbed, and climbed:
Even as interest rates plunged, the percentage of income going to debt service payments rose. And it skewed toward lower-income groups. The share of income going toward debt and lease payments is just over 8% for the highest income groups – those with the biggest income gains – but over 21% for those below the 50th percentile.
The difference between this climb and the debt increase that took place during the 1950s and ‘60s is that the recent jump started from a high base.
Economist Hyman Minsky described the beginning of debt crises: The moment when people take on more debt than they can service. It’s an ugly, painful moment. It’s like Wile E. Coyote looking down, realizing he’s screwed, and falling precipitously.
Which, of course, is what happened in 2008.
9. Once a paradigm is in place it is very hard to turn it around.
A lot of debt was shed after 2008. And then interest rates plunged. Household debt payments as a percentage of income are now at the lowest levels in 35 years.
But the response to 2008, necessary as it may have been, perpetuated some of the trends that got us here.
Quantitative easing both prevented economic collapse and boosted asset prices, a boon for those who owned them – mostly rich people.
The Fed backstopped corporate debt in 2008. That helped those who owned their debt – mostly rich people.
Tax cuts over the last 20 years have predominantly gone to those with higher incomes. People with higher incomes send their kids to the best colleges. Those kids can go on to earn higher incomes and invest in corporate debt that will be backstopped by the Fed, own stocks that will be supported by various government policies, and so on. Economist Bhashkar Mazumder has shown that incomes among brothers are more correlated than height or weight. If you are rich and tall, your brother is more likely to also be rich than he is tall.
None of these things are problems in and of themselves, which is why they stay in place.
But they’re symptomatic of the bigger thing that’s happened since the early 1980s: The economy works better for some people than others. Success isn’t as meritocratic as it used to be and, when success is granted, is rewarded with higher gains than in previous eras.
You don’t have to think that’s morally right or wrong.
And, again, in this story it doesn’t matter why it happened.
It just matters that it did happen, and it caused the economy to shift away from people’s expectations that were set after the war: That there’s a broad middle class without systematic inequality, where your neighbors next door and a few miles down the road live a life that’s pretty similar to yours.
Part of the reason these expectations have stuck around for 35 years after they shifted away from reality is because they felt so good for so many people when they were valid. Something that good – or at least the impression that it was that good – isn’t easy to let go of.
So people haven’t let go of it. They want it back.
10. The Tea Party, Occupy Wall Street, Brexit, and the rise of Donald Trump each represents a group shouting, “Stop the ride, I want off.”
The details of their shouting are different, but they’re all shouting – at least in part – because stuff isn’t working for them within the context of the post-war expectation that stuff should work roughly the same for roughly everyone.
You can scoff at linking the rise of Trump to income inequality alone. And you should. These things are always layers of complexity deep. But it’s a key part of what drives people to think, “I don’t live in the world I expected. That pisses me off. So screw this. And screw you! I’m going to fight for something totally different, because this – whatever it is – isn’t working.”
Take that mentality and raise it to the power of Facebook, Instagram, and cable news – where people are more keenly aware of how other people live than ever before. It’s gasoline on a flame. Benedict Evans says, “The more the Internet exposes people to new points of view, the angrier people get that different views exist.” That’s a big shift from the post-war economy where the range of economic opinions were smaller, both because the actual range of outcomes was lower and because it wasn’t as easy to see and learn what other people thought and how they lived.
I’m not pessimistic. Economics is the story of cycles. Things come, things go.
The unemployment rate is now the lowest it’s been in decades. Wages are now actually growing faster for low-income workers than the rich. College costs by and large stopped growing once grants are factored in. If everyone studied advances in healthcare, communication, transportation, and civil rights since the Glorious 1950s, my guess is most wouldn’t want to go back.
But a central theme of this story is that expectations move slower than reality on the ground. That was true when people clung to 1950s expectations as the economy changed over the next 35 years. And even if a middle-class boom began today, expectations that the odds are stacked against everyone but those at the top may stick around.
So the era of “This isnt working” may stick around.
And the era of “We need something radically new, right now, whatever it is” may stick around.
Which, in a way, is part of what starts events that led to things like World War II, where this story began.
As we begin our coaching session, Nick is fired up. He radiates energy, his eyes are beaming with determination, and he never really comes to a full rest. He speaks passionately of a new initiative he is spearheading, taking on the looming threats from Silicon Valley, and rethinking his company’s business model completely.
I recognize this behavior in Nick, having seen it many times over the years since he was first singled out as a high-potential talent. “Restless and relentless” have been his trademarks as he has risen through the ranks and aced one challenge after another.
But this time, I notice something new. Beneath the usual can-do attitude there is an inkling of something else: Mild disorientation and even signs of exhaustion. “It’s like sprinting all you can, and then you turn a corner and find that you are actually setting out on a marathon,” he remarks at one point. And as we speak, this sneaking feeling of not keeping pace turns out to be Nick’s true concern: Is he about to lose his magic touch and burn out?
Nick is not alone.
In a psychologist’s practice, common themes rise and wane across a cohort of clients. Right now, I see a surge of concern about speed: getting ahead and staying ahead. More clients use similar metaphors about “running to stand still” or feeling “caught on a track.” Invariably, their first response is to speed up and run faster.
But the impulse to simply run faster to escape friction is obviously of no use for the long haul of a life-long career. In fact, our immediate behavioral response to friction shares one feature with much of the general advice about speeding up: It is plainly counterproductive and leads to burn out rather than break out.
To add insult to injury, the way to wrestle effectively with the challenge of sustainable speed is somewhat counterintuitive and even disconcerting — especially to high-performing leaders who have successfully relied on their personal drive to make results.
From ego-drive to co-drive
The key to speeding up without burning up is a concept I call co-drive. Sustainable speed does not come from ego-drive, that is, your own personal performance or energy level, but rather from a different approach to engaging with people around you.
Rather than running faster, Nick needs to make different moves altogether. First, he must let go of his obsession with his own development, his own needs, his own performance, and his own pace. Second, he must start obsessing about other people.
It may seem illogical, but the leap to a new growth curve begins by realizing that the recipe is not to take on more and speed up, but to slow down and let go of some of the issues that have been your driving forces: power, prestige, responsibility, recognition, or face-time.
The talent phase in our careers tends to be profoundly self-centered, even narcissistic. If you need to move on from the first growth curve in your career, and want to take on more challenges, you need to exchange ego-drive for co-drive.
Co-drive requires that you momentarily forget yourself — and instead focus on others. The shift involves an understanding that you have already proven yourself. At this stage, the point is to help those around you perform. The change to co-drive involves moving from a stage of grabbing territory to a stage characterized by letting go of command and control.
So here is what Nick needs to do: Rather than striving to be energetic, he should aim to be energizing. Rather than setting the pace, he should aspire to make teams self-propelling. Instead of delegating tasks, he should learn to lead by congregating.
Be energizing, not energetic. Here is the paradox: You can actually speed things up by slowing down. There is no doubt that being energetic is contagious and therefore a short-term source of momentum. But if you lead by example all the time, your batteries will eventually run dry. You risk being drained at the very point when your leadership is needed the most. Conveying a sense of urgency is useful, but an excess of urgency suffocates team development and reflection at the very point it is needed. “Code red” should be left for real emergencies.
Nick has always had a weak point for people, who, like himself, are high-energy and get things done. These “Energizer Bunnies” are his star players. However, with the co-drive mindset, Nick needs to widen his sights and recognize and reward people who are good at energizing others. Energizing behavior is unselfish, generous, and praises, not just progress, but personality too.
Seek self-propulsion, not pace-setting. If you lead by beating the drum, setting tight deadlines, and burning the midnight oil, your team becomes overly dependent on your presence. Sustainable speed is achievable only if the team propels itself without your presence. Jim Collins wrote that great leaders don’t waste time telling time, they build clocks.
Self-propulsion comes from letting go of control, resisting the urge to make detailed corrections and allowing for informal leadership to flourish. As Ron Heifetz advocates, true leadership is realizing that you need to “give the work back” instead of being the hero who sweeps in and solves everybody’s problems.
In Nick’s case, he should resist the urge to take the driver’s seat and allow himself to take the passenger seat instead. Leading from the side-line, not the front line will change his perspective. Instead of looking at the road and navigating traffic, he is able to monitor how the driver is actually doing and what needs to improve. In his mind, he should fire himself — momentarily — and see what happens to his team when he sets them free and asks them to take charge instead of looking to him for answers, deadlines and decisions.
Congregate, don’t delegate. From very early on in our careers we learn that in order to solve big, complex issues fast, we must decompose the problem into smaller parts and delegate these pieces to specialists to get leverage. Surely, you can make good music by patching together the tracks of individual recordings. But true masterpieces come alive when the orchestra plays together.
One example is the so-called Trauma Center approach. When a trauma patient comes in, all specialists are in the room assessing the patient at the same time, but constantly allowing the most skilled specialist to take the lead (and talk), not the designated leader.
The most well-run trauma teams I have observed know when to jump in and when to step back. To put it simply, it’s no use working on a finger if the heart is failing. A trauma team relies on trust and patience. They trust each other’s specialty and work very symmetrically. There is a very strong “no one leaves before we are done” mentality in those teams.
To Nick, this may sound like good old teamwork, and while Nick is certainly driven by a good measure of self-interest, he is also an accomplished leader who masters the dynamics of teamwork: Having shared goals, assigning roles and responsibilities, and investing in the team.
But there is more to co-drive than plain teamwork. It is about re-working the collaborative process it self. Rather than cubicled problem-solving, sustainable speed requires a shift toward more collective creation: Gathering often, engaging issues openly and inviting others to improve on your own thoughts and decisions.
Co-drive requires a different mindset. And it goes beyond team-work. Adam Grant from Wharton has done research demonstrating that a generous and giving attitude towards others enhances team performance.
Try, for instance, to take a look at your own behavior yesterday and gauge the balance between giving and taking. Givers offer assistance, share knowledge, and focus on introducing and helping others. Takers attempt to get other people to do something that will ultimately benefit them, while they act as gatekeepers of their own knowledge.
Grant’s conclusion is clear: a willingness to help others is not just the essence of effective cooperation and innovation — it is also the key to accelerating your own performance.
Maturity and Caliber
Headhunters call this change of perspective from ego-drive to co-drive “executive maturity.” The mature leader’s burning question is: how do I help others perform?
The developmental psychologist Robert Kegan calls the leap a subject/object shift. You progress from seeing and navigating in the world on the basis of your own needs and motives — and allowing yourself to be governed by these needs — to seeing yourself from an external position as a part of an organism.
It requires a certain caliber and self-assuredness to act in this way. The ability to put your ego on hold may require a great effort. It might be worthwhile reminding yourself of the words of the American President Harry Truman: “It is incredible what you can achieve, if you don’t care who gets the credit.” If you succeed in making this shift, and thereby improving the skills of the people around you, then you will also experience a greater degree of freedom.
So next time you are feeling stuck, don’t ask: “How can I push harder?” but “Where can I let go?”
It’s not the things we worry about that get us in the end, but the things we take for granted. In today’s economy, perhaps more than ever, leaders are waking up to the fact that they can’t take anything for granted and the old rules no longer apply.
It can almost feel like, the more successful your organization, the more in danger you are. And that may be true.
For this reason, good leaders are always in search of evidence to disprove their assumptions and question their biases. So, in that spirit, here are six recent, inconvenient insights from Gallup’s workplace research that you need to know:
1. Only 22% of employees strongly agree their leaders have a clear direction for their organization.
Despite extensive communication plans, presentations and memos, few employees think their leaders know where their organization is headed — and only 15% of employees strongly agree the leadership of their organization makes them feel enthusiastic about the future.
One reason may be that most leaders do not include a significant number of people in shaping the vision of their organization. When people feel like they are a part of the process, they are naturally more enthusiastic about the outcome.
2. Only 26% of employees believe their organization always delivers on its promises to customers.
Most business leaders would agree that delivering on your promise to customers — in quality, delivery or experience — is necessary for success. And in today’s connected world, missing the mark can instantly damage your brand’s reputation.
If roughly one in four employees think their organization consistently delivers for customers, leaders should be worried about the long-term health of their enterprises.
3. Only 12% of employees strongly agree that their organization does a great job of onboarding.
It’s hard to imagine there was a time before every organization had an “onboarding” program. But despite its ubiquity in the corporate world, most employees are not happy with the experience.
A great onboarding program should do more than take care of paperwork; it should help new employees experience your unique culture, see how their work matters, know what’s expected of them, and help them picture a long-term career path with you.
4. Only 14% of employees strongly agree that the performance reviews they receive inspire them to improve.
The truth is that the traditional annual review is in need of serious overhaul. Fewer than three in 10 employees believe their performance reviews are fair and accurate.
One cause is that performance conversations happen so infrequently — and modern business changes so quickly — that when managers and employees finally talk, few of the goals or measurements make sense anymore. That said, there are things you can do to make performance reviews something employees actually look forward to.
5. 67% of employees say they are sometimes, very often or always burned out at work.
Burnout is a serious matter. Employees who are very often or always burned out are 63% more likely to take a sick day and 23% more likely to visit the emergency room.
Burnout impacts employee performance, retention, career growth and even family life. It is not inevitable, and it should never be celebrated as part of a so-called “hard-working culture.”
6. 51% of currently employed adults in the U.S. say they are searching for new jobs or watching for new job opportunities.
Not only are half of all employees looking for a new job, nearly half (47%) say now is a good time to find a quality job. So what do workers want in a job?
Many want flexibility and opportunities to grow. Working for a paycheck is not enough to retain great people. Today’s worker wants a job that fits with their life and allows them to develop their talents.
What These 6 Items Mean For Executive Leadership
So what does this mean for leaders? Business is moving faster than ever. The old ways of doing things aren’t working anymore. And today’s executive leadership needs to be more connected — in a persistent, “always-on” capacity — with the emotions, opinions and attitudes of their employees.
No one would argue that sales and marketing are strategic business functions. They get strong executive support and the big budgets because they feature data-driven decision-making, market segmentation, powerful branding, and customer focus. Recruiting, on the other hand, has long been known as “just sales with a crummy budget,” as HR thought-leader John Sullivan puts it. That perception is rapidly changing as recruitment strategies become a priority.
Recruitment as a sales process has defined by Dr. Sullivan’s work:
Strategic recruiting is an approach to wining the best talent based on three components: employer branding, recruitment-directed marketing, and skilled selling. Combined, these components create effective responses to dynamic market conditions in support of an organization’s strategic objectives.
Transitioning to a more strategic role and adopting a sales and marketing focus is a sea change for most corporate recruiters and their company leaders. Again, we turn to Dr. Sullivan who, in 2008, was way ahead of his time in defining the future of HR as he developed “20 Principles of Strategic Recruiting,” which he has recently updated.
Below, I highlight and add to some of his most critical insights and guidelines. Use them as a foundation for designing or enhancing your own recruitment strategies and processes in to 2019 and beyond.
9 guidelines for recruitment strategies
1. Well-defined strategy
Develop a well-defined and communicated recruiting strategy based on a clear understanding of your organization’s values and vision for the future. Include your brand messages, target candidates, primary sources, and most effective marketing and closing tactics. This helps ensure closer alignment between candidates and your corporate culture.
2. Strong employment brand
The external image you present has the highest impact and longest-term effect of anything you do related to recruiting. You should make it easy for potential candidates to read, hear, or see why they should consider working for you. Candidates are a key audience you need to market your message to regularly. Pay attention to what your message and value-proposition are, how you communicate them, and what specific segment of the talent market you are trying to attract. It’s only the organizations with a poor image that suffer a talent shortage. Build a positive, compelling image and you’re likely to have a surplus of top talent eager to work for you.
3. Prioritized Jobs and Targets
Strategic recruiting processes maximize the use of resources by identifying and focusing on the positions with the highest business impact. This usually means revenue-producing and revenue-impacting jobs, and roles in high margin and rapid-growth business units. Your recruitment processes should also target high-impact individuals like top performers, innovators, influencers, and game-changers.
4. Effective sourcing
Strategic sourcing is the most critical element after employment branding. If your sourcing doesn’t attract top performers, you can’t make a quality hire. The most effective source is employee referrals. Make sure you develop a referral program with a reward that motivates employees to refer good people. Recruiting at professional events is also an excellent way to find top talent. Whatever your means of sourcing, make sure it’s appropriate for the particular position. You should use various sourcing tactics depending on the individual, locale and other factors, targeting both “non-lookers” who may be happily employed at competitors or elsewhere as well as candidates who are actively looking. Effective sourcing saves time and money on candidate screening and the high cost of weak hires.
5. Talent pipeline / Recruiting culture
Like every good sales person, build a continuous “talent pipeline” of applicants you might want to hire in the future. Build your pipeline with impressive people you meet or hear about in a “pre-need” approach that includes workforce planning, employer branding, and continuous sourcing. Your pipeline should be part of a companywide “recruiting culture,” where every employee is an active talent scout, spreading your employment brand and identifying possible future candidates as they interact in the community. The very best candidates are in demand. When every employee contributes to your pipeline, you gain a competitive edge in getting to the right people quickly.
6. Speedy decisions
It’s worth emphasizing that candidates in high demand have many choices. When the right people decide to change jobs you need to be ready to hire them, even if you don’t have quite the right role defined. Build flexibility into your hiring decision process so that you can hire on their decision timetable, not yours.
7. Data-driven decisions
Making decisions based on objective data rather than on emotion, intuition, or “we’ve-always-done-it-this-way” practices helps eliminate biases and produce more consistent, high-quality hires and outcomes. Similar benefits result when you put metrics and rewards on key aspects of recruiting. When managers are measured, recognized, and rewarded for their contributions, and results are converted to the manager’s revenue and profit, recruiting dramatically improves—and processes are meticulously followed. Using metrics/assessments also sends a clear message about the importance of recruiting and its business impact on revenue goals and cost reductions. Marketing made the switch to a data model, recruitment must too.
8. Technology-based processes
The best recruitment processes, in all of their aspects, are based heavily on technology and the internet. Technology can improve screening, increase decision-making speed, cut costs, and enable global hiring. It gives you the ability to do market research to identify the particulars of your recruiting segments and targets and then customize marketing and communication based on the data. Technology also gives you the capability to offer candidates remote work options, giving you a distinct competitive advantage, especially with younger generations who prize that kind of flexibility.
9. Candidate-centric focus
The primary reason candidates reject job offers is because of the way they were treated during the hiring process. Hiring managers and recruiters need to be laser-focused on creating a positive end-to-end experience for diverse candidates. A significant part of recruiting is “selling” candidates on why they should apply for and accept a position with you; another part is building trusted relationships. Throughout, communication should be clear and frequent; processes smooth and easy; and interactions personal and respectful. Treat every candidate as you would your best prospect or customer or, better, how you’d want to be treated yourself. After the hiring decision is made, make certain that the positive experience continues with a thoughtful onboarding process that ensures your new employee feels welcome, important, confident, and ready to make a meaningful and near immediate contribution to your productivity.
Recruiting will not be considered strategic until it adopts a sales and marketing approach. Just like sales and marketing, recruiting must outsell the competition. Use the guidelines above as a foundation for developing your recruiting strategy. Then take a seat at the table where you’ll be a vital partner in creating success.
Despite strong business growth, overall economic optimism among CEOs continues its slow decline reaching the lowest level since November 2016 according to the latest WSJ/Vistage Small Business CEO Confidence Index survey. The Confidence Index was 106.3 in November, and while that is in line with last month’s index of 106.9, it has fallen past November’s index of 112.5.
Analysis by Dr. Richard Curtin, a researcher from the University of Michigan, revealed that the slow decline in this index over the past year has been concurrent with an expected slowdown in the pace of economic growth by CEOs of small firms. If you consider that the economic growth rate for 2018 is 3% so far, maintaining the current pace of growth would be good news.
While tax cuts and spending increases will continue to boost the economy into 2019, other factors loom on the horizon, including rising interest rates, falling stock prices, softened home and vehicle sales, and heightened uncertainty about tariffs and international growth.
Government policy and potential gridlock fuel fears of slowdown in national economy …
Even though the pace of GDP growth was strong in Q2 and Q3, an increasing number of CEOs are anticipating an economic slowdown in the year ahead.
According to the November survey, just 20% of CEOs expect continued improvement in the national economy, which is a significant drop from a recent peak set in January. Only twice before has the outlook dipped to these levels. Dr. Curtin notes that the common element in those dips is the reaction of small firms to government policies or gridlock.
More than one third (35%) of CEOs report negative impacts of tariffs, and 29% of CEOs believe the result of the midterm elections will impact the national economy.
… yet business growth prospects remain strong for small firms.
Despite their view on the future of the economy, CEOs are optimistic about their own companies. The majority of respondents said they expect increases in both revenues and profits for their companies in the year ahead:
75% of CEOs expect increased revenues in the year ahead.
63% of CEOs anticipate higher profits.
Increasing costs may be driving the gap between revenue and profit expectations; over one-third (35%) of CEOs reported a negative impact of tariffs on their business.
However, this has not put a damper on attracting new business, as more than half (51%) of CEOs reported that the number of customer inquiries and sales leads is higher than in last year.
Talent remains a key focus to address expansion.
With increased customer inquiries and strong revenue expectations, talent remains critical for small firms to accommodate growing customer demand.
More than 6/10 (61%) CEOs are planning on workforce expansion in the coming year.
In the face of a tight labor market, CEOs are exploring different tactics to attract and retain top talent. While many small firms are improving their overall compensation packages by boosting wages (59%) and adding benefits (37%), developing the skills and capabilities of their existing labor force continues to be one of the top ways that CEOs have addressed hiring challenges. More than 60% of CEOs are focused on development programs to create the talent they need internally.
CEOs also stress that onboarding the right people is as important as wages and training. More than two-thirds (68%) of CEOs indicate that it is very important to select employees who fit their firm’s values and culture.
One of the most overused expressions thrown around by wannabe “Wall Street Rambos” is business is war. But sometimes war tactics really can help in business.
Among these tactics is CARVER, a system for assessing and ranking threats and opportunities. Developed during World War II, CARVER (then one letter shorter and known as CARVE) was originally used by analysts to determine where bomber pilots could most effectively drop their munitions on enemy targets. It can be both offensive and defensive, meaning it can be used for identifying your competitors’ weaknesses and for internal auditing. In addition, many security experts consider it the definitive assessment tool for protecting critical assets. In fact, the U.S. Department of Homeland Security has recommended it as a preferred assessment methodology.
More recently, CARVER has converted a new community of believers in the business world, including CEOs, financial analysts, and risk management planners, not to mention any number of Fortune 500 security directors. Since it draws on both qualitative and quantitative data, CARVER can be applied in almost any scenario that is analyzed and discussed in an organized, logical way. It can be highly useful if you need to, for example, defend a budget request or a strategic plan to company leadership. Because it helps you articulate an efficient story using numeric values, CARVER can be used to clarify mission objectives — whether on the battlefield or in the boardroom. You might say CARVER is a SWOT analysis on steroids.
CARVER is an acronym that stands for:
Criticality: how essential an asset or critical system is to your company
Accessibility: how hard it would be for an adversary to access or attack the asset
Recoverability: how quickly you could recover if something happened to the asset
Vulnerability: how well (or not) the asset could withstand an adversary’s attack
Effect: how much of an impact there would be across your business if something happened to the asset
Recognizability: how likely it is that an adversary would recognize the asset as a valuable target
To use CARVER — whether you’re assessing a system, a business goal, or something else — you assign scores from 1 to 5 (with 5 being “most essential,” “most likely,” and so on) for each of the six criteria above. The sum of the six scores is the total score for whatever you’re assessing. Once you’ve calculated the total scores for a few things, you can compare them. For example, you could use CARVER to compare two business opportunities; whichever has the higher score is probably the better option to pursue.
Here’s an example. Let’s say the chief security officer for an oil and gas company is deciding how to allocate their budget across multiple locations and assets. At a strategic level, the CSO could use CARVER to think through the factors involved for each location and then allocate resources for each facility.
To start, the CSO would ask a series of questions related to the CARVER criteria. Beginning with Criticality, they might ask, “How critical is the oil pipeline in Abuja, Nigeria, to the company’s overall operations?” Because Criticality is based on the importance of the asset (in this case the pipeline), the CSO would need to determine if the destruction or compromise of this asset would have a significant impact on the output, mission, or operation of the company. The CSO would rank Criticality like this:
5 – Loss of the pipeline would stop operations 4 – Loss would reduce operations considerably 3 – Loss would reduce operations 2 – Loss may reduce operations 1 – Loss would not affect operations
Obviously, the higher the number, the more detrimental the loss of the asset would be to the organization. The lower the number, the less detrimental the loss would be, or there might be redundancies in place — other pipelines, for example. (Those redundancies would also affect the asset’s Recoverability score.)
To assess the Recoverability of that same pipeline (perhaps after a natural disaster, sabotage, or a terrorist attack), the CSO would rank it like this:
5 – Extremely difficult to replace; long downtime 4 – Difficult to replace; long downtime 3 – Can be replaced in a relatively short time 2 – Easily replaced in a short time 1 – Can be replaced immediately; short or no downtime
The CSO would then continue ranking the Abuja pipeline on the other four criteria. If the pipeline received a 5 for Criticality and Recoverability, for example, it seems likely that it would be a good candidate to receive more of the CSO’s budget.
To consider another example, say a hedge fund is looking to acquire a tech company that claims to have a leading-edge technology. In addition to simply auditing the company’s books, analysts could perform a CARVER assessment to determine how close the competition might be to catching up to this technology, thus balancing the risk of the investment. The tech company may score low (meaning good) on Criticality and Recoverability but score high (meaning bad) on Accessibility and Effect. That Accessibility score might mean a competitor could beat the product to market, and the Effect could be the fallout from a controversial marketing campaign.
One question the analysts might ask for Effect is: “What is the effect on us if the tech company’s competitors beat us to market?”
5 – Very high economic, political, or social impact on the organization 4 – High economic, political, or social impact 3 – Moderate impact 2 – Little impact 1 – No unfavorable impact
The important thing to remember is that this exercise is conducted to identify, categorize, and prioritize high-risk assets; to assess vulnerabilities; and to make recommendations around risk. Once a CARVER assessment has been completed, and material risks and threats have been identified, security and risk management professionals can determine the best approach to take. Even the smallest difference in CARVER scores could influence whether you open a store in one location versus another, or help you decide between upgrading an existing product line and opting to create something new.
Strategic decisions are being made in boardrooms everywhere, by executives who are looking for any advantage over the competition. Business leaders are looking for hard numbers to provide them with an edge in their decision-making process. CARVER can provide a quantified justification for standing by — or abandoning — a decision or initiative.
In a recent Vistage meeting, we talked about small business growth, and the inescapable challenges with growth and its impact on cash flow, profitability and culture. At Vistage, we talk about growth all the time. Growth is one of our “sacred” principles. We are proud that Vistage member companies outgrow their industry counterparts, who are not Vistage members, 2.2 times faster.
Growth is good. But growth is also hard. And maybe not always the best goal or route to take.
“Small Giants” are remarkable and fascinating companies who have chosen to focus on being Great instead of Big.
I rarely promote books in my writings, but Small Giants, by Bo Burlingham will be one of my exceptions. This book is a fantastic read for business leaders of any sized organization. In a similar way that Jim Collins studied large companies in Good to Great, Bo studies 14 successful small businesses to figure out why they are great, and why and how they chose NOT to grow, at least in the traditional sense of growth. And I am convinced that there are many others like them in our economy.
Size and growth rate aside, these small giants share some very interesting characteristics. They are all hyper focused on being the best at what they do. Most have been recognized for excellence by independent bodies inside and outside their industries. All have had the opportunity to raise outside capital, grow very fast, do mergers and acquisitions, expand geographically and generally follow the traditional route that made others successful. But they chose to stay on the road less traveled.
They also demonstrated the following five characteristics:
Unlike most entrepreneurs, their founders and leaders recognized that they had a full range of choices about the type of company they could create. They questioned the usual definitions of success. They also resisted the usual pressures to go public, expand quickly and geographically as most successful companies do.
Each company had an extraordinarily intimate relationship with the local city, town or county in which it served — a lucrative business relationship that went well beyond the usual concept of “giving back.” This aspect of the companies was unique and insightful.
They cultivated exceptionally closebonds with customers and suppliers, based on personal contact, one-on-one interactions and mutual commitment to deliver on promises.
The companies also had unusually intimate workplaces that strove to address a broad range of theiremployees’ needs as human beings. They also came up with a variety of corporate structures and modes of governance. Creativity and flexibility were important. There was no magical organizational template. But they worked diligently to determine what worked for them.
The leaders of these companies brought passion to what the company did.
Dirk was puzzled about what just happened. To the best of his knowledge, he had only asked Jerome (a recently hired senior executive), to deal more proactively with some of the company’s clients. But Jerome had suddenly become angry, defensive, and stalked out of his office.
Jerome, for his part, was also confused. Why had he reacted like that? Usually he was quite in control of his emotions. Somehow, however, Dirk’s comments had hurt, and he had reacted without thinking.
We can understand something of what happened between Jerome and Dirk by understanding that the human brain is wired for pattern recognition. In short, our brain acts as a sort of pattern matching and pattern generating machine, and when things aren’t already in patterns it tries to make sense of what it sees by fitting it into familiar shapes. Our previous experiences are used as a shortcut for understanding and interpreting new information. It makes sense: if a match can be found between new and old data, then our stored knowledge can be applied to the new situation at much less “cost” than our brain having to figure it all out again.
The same kind of sense-making process is at play when it comes to our relationships with other people. Based on our existing “relationship data bank,” our brain unconsciously organizes new experiences in such a way that they fit the relationships we are familiar with. Thus, when we are trying to understand someone we don’t know well, our brain tricks us into assuming that this person will behave similarly to a previously experienced other. We feel good about a person who remind us of loved ones, while alarm bells will go off in our brains if that person reminds us of previous acquaintances who caused us pain. In this way, we often attribute to people characteristics that aren’t really there, automatically and without thinking. And we tend to act towards people in the present based on our experiences from the past.
After calming down, Jerome realized that Dirk reminded him of his overbearing father. When Dirk leaned over his big wooden desk and told Jerome to be more proactive, it reminded Jerome of how his father used to lean over the kitchen table and ask why he wasn’t more of a go-getter. His over-reaction was almost exactly what he had done in fights with his father, too – getting angry and storming away.
This “erroneous” interpersonal connection was first described by Sigmund Freud in his famous Dora case under the name of transference. Trying to understand this unsuccessful therapeutic intervention with his patient, he came to realize that its reason lay in his failure to recognize the transfer of emotions held by Dora for a person from her past onto Freud himself.
Given that the original sources of our transference reactions are important people of our early years, such as parents and other caregivers, as well as siblings and close family members, transference reactions tend to be directed toward people who perform roles similar to those originally carried out by these people. Thus, doctors, teachers, celebrities, and authority figures in general are particularly prone to activate transference responses.
It is transference when you fall in love at first sight with the person who reminds you of someone with whom you had once a passionate love affair. It is transference when you trust someone instantly, without realizing that this person reminds you of a trusted figure from the past. It is transference if you are enthralled by a boss who resembles an encouraging and supportive grandmother. It’s also transference if you take an immediate dislike to someone who reminds you of a negative influence in your past.
If you have ever had an emotional reaction to someone which was clearly too intense for the situation, you have most likely experienced a transference reaction. As transference reactions are essentially a reliving of the past, the reaction they trigger is often inappropriate, and even bizarre, in the context of the present.
Transference reactions are not troublesome in moderation. They can create problems, however, when our reactions become excessive, and when they prevent us from building an appropriate relationship with someone who can have a strong influence on our lives. And when we are susceptible to repetitive, excessive transference reactions, we are most likely troubled by some deeper issues or unfinished business from the past.
While our unconscious transference reactions can easily lead us astray, creating awareness of them can help us to become more conscious of our hidden motivations and learn to avoid repeating mistakes and thus to be more in control of our lives.
Reflect on patterns of behavior that have gotten you into trouble, and where you feel that your judgment has repeatedly been poor. To help you in analyzing what has happened, ask yourself the following questions: What kinds of people make me feel anxious, angry, sad, or happy? What do I like or dislike about them? And who in my past do these people remind me off? How are they similar or different? Discovering the ghosts of past is the first step towards not letting them interfere with life in the present.
Dealing with transference issues on your own can be challenging. You might consider enlisting a therapist or coach. With their help, past conflicts can be worked through and left where they belong — in the past.