Is The US Stock Market Rigged?

Author Michael Lewis says it is. 60 Minute’s March 30th expose on the subject may be of interest to you. Lewis’s new book Flash Boys was released on Monday.

What’s the thumb nail version of the story?  Clever traders were manipulating the market by gaining a speed advantage over everyone else—including unsuspecting industry veterans. In the industry it’s called ‘front running’.  The advantage (pennies per trade) times gazillions of trades resulted in some serious money—measured in the billions.  The impact to the average investor was small but still ‘didn’t feel right’ to Brad Katsuyama the hero of the story.

Brad, a former employee of the Royal Bank of Canada, ran the New York trading desk for RBC in Manhattan when he discovered the problem.  Long story short, he eventually started his own exchange to counteract ‘front running’.  Big players in the financial services world are taking notice—with some having invested in the new exchange.

Katsuyama notes, “We’re selling trust.  We’re selling transparency. To think that trust is actually a differentiator in a service business is kind of a crazy thought, right?’  Arguably a number guy, Katsuyama learned first-hand how the absence of trust is like a cancer to an industry that depends on it.

When asked why he left his cushy (and very lucrative) job at RBC to start a risky new exchange, Katsuyama noted, ‘it felt like a sense of obligation” to fix a troubling problem that was negatively impacting millions of unsuspecting people.

Katsuyama is all about doing his part in restoring trust to the financial markets.  I’m really grateful he did. To many he’s a hero.  To me, he’s the consummate professional.  —the ultimate compliment in my book.

 

 

 

When Identities Compete

Some of our toughest (and often best) decisions are by-products of competing identities we hold.  For example, a politician courageously acts in the best interests of the nation—rather than acting in the best interests of their political party.

What competing identities, you ask, were in ‘play’ for the politician?  Namely, being an American versus being a Republican.  (NOTE: The example of being a Republican is for illustrative purposes only.  The politician could have just as well have been a Democrat).  In this particular instance, the politician felt the ‘tug’ of being an American outweighed being a Republican (their revered political party).  Thus, the politician was willing to take an unpopular stand—unpopular, at least, from members of their own party.

Recall Stanford Professor James March’s research on decision-making wherein he theorized that our choices are strongly influenced by one of two factors: 1) the consequences one is subject to–what one gets versus what it costs OR 2) an especially important aspect of one’s identity.  The former is quite calculated, the latter is quite intuitive.

Yet, decisions aren’t always rendered exclusively by a comparison between March’s two factors. Sometimes the decision is rendered as a result of a comparison within only one of March’s factors. In the politician’s case, the defining struggle became one of identity.  Which identity (being an American versus being a Republican) was more important?  In the end, the politician made a value judgment in putting the country first, their political party second.

It’s not unusual for one’s most difficult and consequential decisions to be influenced by an especially important identity they hold. That shouldn’t be surprising—given the inseparable correlation between identity and one’s personal values.  And it also shouldn’t be surprising that an identity-based decision is one that, while difficult, is often one that the individual is especially proud of.  After all, it frequently reveals their very ‘best-self’.

Monday’s Pleasant Surprise

Trust Across America is an organization dedicated to improving the level of trust within the business sector.  Founder Barbara Kimmel has done a tremendous job growing the influence of the organization.

Earlier today Trust Across America published their top thought leaders for 2013. I’m pleased (and humbled) to have been included. The list has many notable (and impressive) people.

I can only hope this honor helps advance the important work we’re doing here at Wiersma and Associates.

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The Election–It’s About Confidence Stupid

In two weeks the US goes to the polls to elect (among other things) the president. It’s a tight race. The election is dominated by concerns over the lackluster economy—which has clearly become the defining issue of the election.  Simply put, all other issues in this election are largely peripheral.  This election is about regaining confidence in the economy.

Founder James Madison wisely observed that “the circulation of confidence is better than the circulation of money.” To me the successful candidate will be the one who people have confidence in—confidence to turn the economy around.  It’s true that confidence can sometimes be misplaced.  Let’s hope that’s not the case in two weeks.

Fixing Our Broken Government–Optimism To Mitigate An Otherwise Sobering 4th

Earlier today I received an e-mail from Geoff Smart, Chairman and CEO of ghSMART & Company.  Geoff’s firm is a renowned management assessment firm for CEO’s and investors.  His wonderful book Who is a classic on hiring ‘A’ players—it became a NY Times best seller.    

Geoff was writing to announce his new book Leadocracy.  It was a pleasant surprise.  The book was written, in part, because of Geoff’s hope (in some small way) of ‘fixing’ our broken government.

I couldn’t help but think back to my own book The Power of Professionalism (which Geoff happened to have endorsed) which had as a sub-plot getting our country back on track.  In other words, Geoff and I shared a similar concern about the health of the country and had dedicated significant aspects of an otherwise traditional business book to the nation’s health.

Yes folks, the United States has some serious issues—and they’re pretty sobering. On the verge of July 4th, my hopes are still high for the nation.

The answer, in part, is to expect elected officials to be professionals who happen to be politicians, not professional politicians.

Happy 4th everyone!

 

Professionalize Teaching ?—A Duke University Senior Speaks Out

‘We must become more professional’ is a mantra I regularly hear amongst both the for-profit and non-profit sectors. For instance, many have argued that management should have the same types of standardized professional requirements that law does.  Whether you agree or not isn’t the point.  Rather, it’s symptomatic of some level of dissatisfaction of the profession itself.

Recently in the Contra Costa Times another such article “Educating Under Oath”, surfaced. It’s about teachers–written by Matthew Straus, a Duke University senior. Check it out.  And notice the thinking that is foundational to the oath Straus proposes teachers take.  To me, it’s clear that Straus holds several of the mind-sets we write about in The Power of Professionalism.  Am I surprised?  Not at all!

Do We Need A Statue of Responsibility?

It was the renowned scholar Viktor Frankl (who wrote the amazing book Man’s Search For Meaning) that recommended that a Statue of Responsibility be erected on the west coast to compliment the Statue of Liberty on the east coast.

Politicians regularly pass laws that (so they believe) create new rights. Marketers regularly insist that we have a right (i.e. we deserve) to their products.  Lawyers incessantly remind us of our rights.

Trouble is…great countries, great companies, great families didn’t get that way by  emphasizing ‘rights’.  Rather, they became great by emphasizing ‘responsibilities’.

Frankl was on to something!

It Gets Worse–Legalized Insider Trading Revealed In 60 Minutes Story

After writing The Power of Professionalism there are (literally) hundreds of illustrative stories about distrust that I could share with readers if I chose to.  Almost always I chose not to share them—largely because people have become desensitized.  There’s too many and, cumulatively, they become too painful. People know there’s a big problem with distrust–there’s no sense piling on.

That said, a recent story is worthy of sharing–because it exposes (essentially ) legalized political insider trading in Washington. We have 60 Minutes story– Congress Trading Stock Insider Information to thank.

If you have had any doubts about why Congress is the second least trusted entity behind Wall Street, this vignette should convince you why the public holds Congress in such contempt.  This story, once again, demonstrates why we need professionals who happen to be politicians–not professional politicians!

Where’s The Professionals When You Most Need Them?

Sad, but not surprising, news—Americans’ distrust of government is at its highest level ever. 89% say they distrust government to do the right thing. 84% believe the country is on the wrong track.  We’re in uncharted waters here.

A democracy depends on trust.  Without it the country suffers in a big way–just as it is now.

The answer?  Professionals who happen to be politicians…not professional politicians.