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dispatches from the new world of work

The "2Bs": Buffett. Basics.

The subprime mess gets nastier by the day. I've seen recent estimates of the fiscal damage alone exceeding $1 trillion. (Not enough pain to reduce Wall Street bonuses, mind you—a record $39 billion in performance-based handouts expected.) W Buffett long ago gave us fair warning when he said that all the higher-mathematical models in the world can't overcome problems with the value in the original transactions. (Bob Herbert's "A Swarm of Swindlers" op-ed in yesterday's NY Times is an appalling tale of the behavior of the hyper-aggressive lenders.) Then a couple of days ago I read that Buffett also got the A-Rod deal with the Yankees sorted out. Turns out A-Rod wanted to stay with the Yanks. His pal Mr Buffett offered him a great suggestion: Call 'em. A-Rod called direct, no agent (all-mighty Scott Boras) involved, and the deal was done. (Well, not quite; as I read it, A-Rod, post-Buffett call, in turn called 2 of his senior Goldman Sachs buddies to see if they thought it would be cool if he called one of the Steinbrenners direct—dear God, as it were, does A-Rod call Pope Benedict and ask if it's okay to cross against a "don't walk" signal? How many agents can be fit on the head of a pin ...)

So Buffett is my "cutting through the fog of war" hero: (1) If lotsa truly crappy loans were made, it'll eventually catch up with us. (2) If you want to play for the Yanks, why don'tcha speed-dial 1-800-Hank Steinbrenner.

In fact, I'm busy Buffett-izing my presentations. The Madrid Keynote posted a couple of days ago is the best example to date. I'm turning my back on "sophisticated formulations" and "tightly argued," logical presentations. I'm focusing instead on "common sense stuff" (a Buffeteria of ideas?) that I've picked up over the years—and presenting it in as straightforward a way as I can. (I have recently begun my public remarks with, "I am here under false pretenses. I have nothing interesting to say. I have flown 5,000 miles for the sole purpose of reminding you of things you've known for years or decades—which, alas, get lost in the shuffle of daily affairs.") I believe to my marrow that we fail to achieve excellence by failing to obsess on the basics—not because we couldn't decide precisely where in the blue ocean we wanted to drop our anchor.

Thinking about subprime mortgage mathematically derived packaging instruments and sports agents with sophisticated spin-driven negotiating tactics, doubtless based on "game theory" math, led me to a pair of quotes from an 18th century leader, N Bonaparte: "The art of war does not require complicated maneuvers; the simplest are the best, and common sense is fundamental. From which one might wonder how it is generals make blunders; it is because they try to be clever." "A military leader must possess as much character as intellect. Men who have a great deal of intelligence and little character are the least suited. It is preferable to have much character and little intellect." (Source: Jerry Manas, Napoleon on Project Management. Manas claims that Napoleon's "six winning principles" were: exactitude—sweat the details, speed, flexibility, simplicity, character, moral force. This makes sense to me, especially since Manas' sextet matches perfectly the approach of the two military figures I most respect, Horatio Nelson and Ulysses Grant.)

There's one other quote that comes to mind, from Picasso: "Every child is an artist. The problem is how to remain an artist." So, if we (Napoleon's generals or commanding officers of 4-person training departments) can somehow manage to hold dear those beloved basics of childlike artistry, we will be well served, regardless of our chosen field of practice.

Tom Peters posted this on 11/21/07.

Comments

Reads like an underpromise & over deliver premise.

The complexity vs. simplicity mantras always appeal.

I recall how A-Rod's 1st NYC year was too complex for him - the move - the new home - the spouse in the new giant city - the new NYY culture - too much new.

And apparently pro sports people thrive best @ 20,000 thoughts per day - you know how they love & crave routine right down to which shoe gets tied 1st. Anyway - too much newness means 35,000 thoughts a day = overload & it compromises performance.

Maybe this is from Michael Lewis in Moneyball or similar.

PS - the latest Forbes magazine mentions 2010 as another key subprime year for ARM expirations. Time to go vacation home shopping.

Posted by John at November 21, 2007 7:35 PM

Imagine my surprise to drop by and find Tom Peters quoting me.

Well; almost. My presentation Friday night didn't refer to flying 5,000 miles, but otherwise, my intro was almost word for word what you've been saying (in the paragraph about Buffetizing)

Common sense. Best Beloved is fond of announcing that there's nothing common about it.

Posted by Joel D Canfield at November 21, 2007 11:12 PM

As for sub-prime mess â€“ wholly attributable to GREED!

As for comments made by â€˜Oracle of Omahaâ€™ â€“ attributable to candor & school of hard-knocks training

As for Tom tweaking his presentations â€“ Well Done! Its all about common sense (which is not so common now-a-days!) I believe success is more a function of consistent common sense than it is of genius.

Posted by K.Sriram at November 22, 2007 4:21 AM

buffet's two rules of investing (which by the way can be applied to almost any endeavor where there is a base axiom): rule #1 - never lose money. rule #2, never forget rule #1.

Posted by Steve Waugh at November 22, 2007 8:27 AM

I had one of those ah-ah moments tonight reading a blog post (http://www.verasage.com/index.php/community/comments/advertising_age_editorial_understands_where_profit_comes_from) "Profits come from risk, which is the role of the business enterprise. Not safety, not a guaranteed rate of return for showing up and having overhead and profit desires."
This piece of common sense made me resolve to do something which I had been hedging on. Which proves the point that people need to be continually reminded about core principals.

Posted by Stephen at November 22, 2007 11:08 PM

So Napolean was a Lean general? No queueing, no waste just an efficient piece of conquering!
The sub-prime business does indeed tell us a lot about extra-intermediation - bodies like Freddie Mac and Fannie May have been inserted between the banker and his client to make loans cheaper! This is fundamentally counter-intuitive to say the least.
There are also some perverse affects (see my link) from well intentioned regulation that unleashed the human greed and creativity that produced the current bubble.

Posted by Matt Birchall at November 23, 2007 3:03 AM

Napoleon a fan of simplicity aye? - Wow!! I'm in good company and him a Frenchman too! :-)

Sriram is absolutely right about GREED.

Greed underpins most of the problems in our supposedly advanced economies. Money has become a new religion according to Tony Benn. Tony says if he could write music he would create a new hymn for the financial news announcers on radio. Imagine these words set to religious musicâ€¦

'AND THE DOW JONES INDEX OPENED THIS MORNING AT ETC. ETCâ€¦â€¦..â€™

If it were not so tragic it would be funny.

As I read about wives and girlfriends of city financiers in London being unable to think of more ways of spending just the BONUSES (never mind the basic salary) of their partners I think at the same time about 20,000 people dying every day â€“ mainly children â€“ through extreme poverty. I canâ€™t help but think about this wonderful quote

â€œWhen I give money to the poor I am called a saint. When. I ask why the poor are hungry, I am called a communist.â€ -Dom Helder Camara (1909-1999) Full title - Rev. Helder Pessoa CÃ¢mara, Archbishop of the Catholic Archdiocese of Olinda and RecifÃ©, Brazil.

And so we come full circle to Napoleon and simplicity. What could be simpler than giving unnecessary wealth to people who need it?

It IS simple â€“ we make it complicated.

Posted by Trevor Gay at November 23, 2007 5:04 AM

Amen, sir.

"I believe to my marrow that we fail to achieve excellence by failing to obsess on the basics"

The great pitching coach Leo Mazzone -- who shaped the careers of Glavine, Smoltz, and so many others with the Braves -- is famous among all his pitchers for CONSTANTLY reminding them to locate their pitches low and away. Endlessly, relentlessly, at least once every ten minutes, and regardless of how long he's been coaching you, whether you've won 200 games, etc.: "Low and away, got it? . . . Locate it low and away, right?"

Never let yourself get away from the basics.

Posted by Tim at November 23, 2007 11:20 AM

I'm feeling quite smug about the whole sub-prime situation. While finishing my Bachelor of Commerce in 2001, I toyed with the idea of getting an MBA. I remember previewing one of the finance textbooks that I would have to study and reaching the conclusion that either I'm too stupid to be in business or the entire finance industry is bat-shit crazy.
Now I'm a successful systems administrator and they have lost a trillion dollars.

Me 1, MBA programs 0.

pardon me while I gloat.

Posted by John at November 25, 2007 12:52 AM

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Actually, Tom, I always thought that simple but powerful insights were the most valuable thing about your work. I just went back to my original copy of ISOE. Here are some of the things I highlighted on early read-throughs. "What we are against is wrong-headed analysis, analysis that is too complex to be useful and too unwieldy to be flexible â€¦" (pg 31) and "Ford, meanwhile, has seventeen layers of management, while Toyota (and the 800 million member Roman Catholic Church) has five. (pg 65) and "Treat people as adults. Treat them as partners; treat them with dignity; treat them with respect. Treat them â€“ not capital spending and automation â€“ as the primary source of productivity gains." (pg 238) Simple. Lucid. Helpful.

viagra for men canada Posted by Wally Bock at November 25, 2007 6:15 PM

Well said Wally and the electronics company Philips gets it too. This is what I say on my Blog today.

'Needless to say I am thrilled to see Philips using simplicity as their brand identity. Philips is one of the world's biggest electronics companies and Europe's largest. It is a global leader in Healthcare, Lifestyle and Technology based product and services. I hope this represents the thin end of a massive wedge that is needed to make the whole business world sit up and take notice.Thanks and well done Philips for taking the initiative and leading the way in the business world for proclaiming the very same wonderful simplicity Iâ€™ve been talking about for 30 years.'

Posted by Trevor Gay at November 25, 2007 6:55 PM

Bravo Tom! The most successful business strategy ever devised was the K.I.S.S. principle. It was true thousands of years ago when someone realized that the elegance of simplicity could consistently triumph complexity and it's still true today.

As for Mr. Buffet, I've been a fan of his forever. When I was in business school, he was one of a litany of famous (and infamous) financial experts to come and talk to our class. He was the only one who did not talk in terms of derivatives, arbitrage and return on risk.

He simply talked about common sense approaches to investing and managing money. Invest in what you know or understand, avoid anything that was too complicated and if there was no transparency it was not worth spending a dime on.

His simple mantra of not investing in anything you don't understand is probably the most valuable piece of advice you could ask for. Ten years ago I had several colleagues urging me to invest in Enron - "It's the hottest think out there" they kept saying. I kept asking what Enron did, besides energy production and pipelines, and how they were making their money. My colleagues could not answer, so I stuck to the Buffet mantra. In the end they lost their shirts and I did not.

pfizer viagra online A-Rod, on the other hand, just proved that high-powered agents are probably superfluous to superstar athletes. John Stockton of the Utah Jazz knew this, he never had one, and did quite well for himself. I read that he negotiated the basics of his last contract in the parking lot after practice one day. It looks like A-Rod is starting to understand this same principle.

Posted by Andrew Hayden at November 26, 2007 2:55 PM