Constructs a systemic explanation of the American financial market’s fin-de-siecle crash. Beginning with growing public faith in equities during the 1980s, Lowenstein portrays the rise of ‘shareholder value’ (i.e., stock prices) and excessive executive compensation as the most important paving stones. Both worked against ethical, long-term decision making. During the late 1990s, business standards also slipped in accounting, stock analysis, and law enforcement (as the government was overwhelmed and self-disarmed by the repeal of Glass-Stegall). Although dot-coms were everywhere evidencing bad deeds as well as misjudgment, the worst offenders were Enron, Worldcom, and Arthur Anderson. The author is marginally confident that Sarbanes-Oxley and other reforms will prevent recurrence: has the culture changed? (Probably not, human nature being persistent.) The indictment is compelling, but for the curious tenet that the market permissively allows ‘too many’ companies to compete in certain segments, such as air travel. Ultimately, he seems to lean toward centralism or worse.
Business
8. Lambert, Financial Literacy for Managers (15 Aug 2014)
Surveys core tools of financial management – income (P/L) statement, balance sheet, cashflow statement – showing how they are meant to work and identifying common intricacies which can distort a clear picture. The book then turns to evaluating costs, how the balance sheet (assets and debt) can be put to use, and assessing investment opportunities. A clear, concise reference that summarizes the Wharton exec ed course.
17. Bennett and Miles, Riding Shotgun: Role of the COO (26 Aug 2017)
An academic study of a nebulous executive role, driven by identifying commonalities surfaced through interviews. There are several common models — ‘two in a box’, mentorship, divide and conquer (outside/inside), successor planning — any of which can work provided the model is agreed. Complementary skills and mutual trust, as well as ability to resolve decisions gracefully (with the benefit belong to the executive) are vital. The operating offer must balance the executive’s vision and the corporate strategy with delivering results.
11. Kaplan, Silicon Boys (17 Jul 2018)
A brisk, sometimes adoring treatment of the tech industry’s rise, circa 1970-2000. Kaplan often traverses the boundary running along technological vision and advancement and business gain and rapacity. Venture investors such as John Doerr receive individualized treatment to rival regulars such as Robert Noyce, Bill Gates, or Steve Jobs. There’s also a useful treatment of the Microsoft antitrust case. But although well researched and written, the book fails to address why so many talented people have dedicated their careers to the field.
4. Peter Drucker, Daily Drucker (27 December 2021)
Decomposes the management theorist’s postwar oeuvre, exposing key tenets of his ‘social ecology’. Much influenced by Bagehot, Drucker’s views reflect his time in Weimar Germany as well as his interests in the contemporaneous emergence of management and the knowledge economy. Notable principles:
• The strongest argument for business as a social organization is the function of loss: efficient abandonment
• There are three models of the corporation: the German, which emphasizes the social market; the Japanese, which favors the social; and the American, which prioritizes the economic
• Management creates development, not capital or labor. The proper direction of human energies generates progress and wealth (p. 56), whereas central planning cannot master information and its productive use
• Management is a practice, drawing from other disciplines as well as its own precepts. It must emphasize the whole – focusing on the parts obscures the objective of serving customers
• The question ‘what is our business?’ can be answered only by outsiders, for the purpose lies in society, and its mission is to create customers
• A theory of a business entails assumptions about its environment (society, marketing, custom, technology); its mission (what are the expected results); and its core competencies. A business audit comprises mission and strategy, the relevant market, innovation, productivity, people development, and profitability
• The innovator makes most of the profit, and profit is short lived. Nonetheless, he has best seen the future, which has already happened
• Schumpeter always asks: is there sufficient profit to re-invest? That is, to pay for the cost of creative destruction
• Leadership lifts men to higher ends. Day-to-day management should therefore emphasize strict conduct and responsibility, performance standards, respect for an individual’s work. Leadership multiplies strengths. Its requirements are listening, communicating, not making excuses, and subordinating itself to (its share of) the task (i.e., management by objective)
• Authority and responsibility should be congruent
• The first task in assessing knowledge work is to define quality
• The most effective route to self-renewal is to pursue unexpected success
• Focus on strengths, improve strengths, reduce disabling habits
• Decisions: start with what’s right, not what’s acceptable. There are two compromises, when half is better and when the compromise does not reach the boundary condition. Then build action into the decision: who has to know? who’s to act? what are the objectives of action?
• Managers set objectives, organize, motivate and communicate, measure, and develop people. Manage to objectives, using control, that is the discipline of reaching excellence
• The organizational unit must be single-minded or its members become confused
• To measure knowledge-work productivity, measure EVA (economic value added): value added / expenses. Capital investment should be assessed by ROI, payback, cashflow, and discounted present value