Monthly Archives: January 2016

Random thoughts – keeping you on your toes

Leading from Behind

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The concept of using leadership behaviors out of the spotlight (leading from behind) to influence others to breakout their own leadership behaviors (the leader within) are not new, nor am I the originator of these ideas.

I do, however, really buy into these concepts.  Most of us can name a historical figure that represents our concept of a great leader, but that does not mean well known leaders are the only great leaders.

Leaders don’t need to be in front of their followers

Let us define leadership as a specific set of behaviors, which results in great achievement.  Achievements which are not possible to attain by normal behavior.

“Lead from behind” is a very cool concept because it is more about facilitating success by providing the framework for a group of people to behave as leaders.   A critical mass of leadership behavior is achieved and becomes a powerful force of positive change/achievement.

Consider American Civil Rights Movement of the 1960’s

Martin Luther King is often named as a historical figure and a key leader of the black civil rights movement.  The reality is Mr. King was a catalyst for hundreds of leaders who were not in fact following Mr. King but leaping ahead of him.

Names like Claudette Colvin, Aurelia Browder, Susie McDonald, Mary Louise Smith and Rosa Parks all are good examples of this.  Their actions strongly contributed to the changes in civil rights laws as they pertained to black people, and their actions are founded on key leadership behaviors (things like knowing the objective, self awareness, confidence, and so on).

Leading from behind Martin Luther King acted as a catalyst for these leaders as well as thousands of others.

The Gandhi Example

One of my favorite stories about leading from behind is true story about Gandhi.   During the campaign for Indian independence, Gandhi left the middle of a press conference in mid question.  The reporters were asking about his views on the peaceful separation of India from England.  As a large demonstration passed the press hall, with signs praising Gandhi,  he stood and stated, excuse me I need to go and catch up with my followers.

It’s not about you

A key take away from this concept of leadership is that it is not about you.  Strong effective leaders recognize the power lies with others, the leader is only the catalyst.

Random thoughts – keeping you on your toes

Buy and Hold

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As the equity investment market in Canada is in strong decline as of late I am doing a few posts on investing concepts.  I strongly recommend you follow the series in sequence.  I started Sunday with some high level concepts and focused yesterday on equity investing.

Don’t need the capital, hold!

The object of investing is  to provide fuel for the economy while making some money for yourself.  Invested funds are used to produce products or services which are paid for with money which is used by the producer to pay wages, produce more product and services, return money to investors and buy other stuff.  This in turn puts more money in the economy and everything spirals up.

When you provide capital to fuel the economy, as noted yesterday, even if the investment drops in value (unrealized loss) as long as you don’t need the capital back you can hang on until you have an unrealized gain.  You could then sell and realize the gain or not and just continue to hold the investment.

Why would you do this?

The intent of investing is to make money.  This can be from dividend/interest payments or capital gains.  The goal is to have optimal returns and if you can grow your funds through all all three ways (dividend, interest, capital gains) of course this is a good idea.

That being said, if you buy the investment and get a solid steady continuous  return with little risk without fooling around with the capital by just gathering income, than why not.

And the Point

These days of doom and gloom, the media is screaming about the economic downturn and capital losses in the equity markets (among other bad things).  The reality is, if you don’t sell your capital investment you don’t lose anything.

In fact, a possible but exaggerated example might be the case where you invested $1 million in a bunch of blue chip stocks with dividends of 10% or $100,000 a year.  From today, the capital value of the stocks might drop to $500,000 (don’t sell yet so not actual loss) and five years from now it might be $2 million.  If you hold the investment for 5 years you will earn $500,000 in dividends and then $1 million in capital gains (if you sell at that point, I would probably still hold).

All just because you held on.

The Caveats

Of course if the company stops paying a dividend or goes bankrupt you will ultimately lose.  The thing to consider though, is how likely is this for blue chip stocks (it does happen but not often) and if it does there are probably more problems – big companies collapsing can’t be good all around.

And the final word is, obviously if you are leveraged (owe money) or have an unexpected need for the capital then this approach does not work.

If you can follow the buy and hold approach, though it is not guaranteed the likelihood of  a reasonable reward is a decent possibility.

 

Random thoughts – keeping you on your toes

The value vanishing act

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As the equity investment market in Canada is in strong decline as of late I am doing a few posts on investing concepts.  I strongly recommend you follow the series in sequence.  I started yesterday with some high level concepts.

Disappearing Value

In the case of equity investments you are actually purchasing a piece of paper, that is a stock certificate; which indicates how many stock you purchased and that they are registered to you.  (In today’s world your broker usually keeps the registration record on your behalf  electronically and actual certificates are not issued. The stock is technically shown on the company books as held by the “street name” of the broker.   You are known as the beneficial owner.)

The point is, when you buy the stock what you are actually buying is a piece of paper  (or electronic record) saying you have some ownership on the issuing company.

As an owner you are entitled to dividends (a fixed amount returned to the owners on a fixed frequency) if the company’s board of directors decides to pay them (they don’t have to).

If the demand for the stock rises and others want to buy it you can sell your piece of paper for more than you paid for it.  The difference between what you paid and what you received is a capital gain.

If the demand drops, but you need to sell your stock (piece of paper) and get the money out for other purposes you might sell it for less than you paid.  The difference between what you paid and what you received is a capital loss.

Unrealized Capital Losses and Gains

The stock market your stock is listed on (for example Toronto Stock Exchange) will list the offered buy and sell prices throughout the business day as well as actual buy and sell transactions that occurred.  You can use the offered selling price or the actual end of day closing sale price to determine if your stock is worth more or less than you paid.  Until you actually sell your stock this difference is called an unrealized loss or gain.

Focus on Income or Capital Gains?

If the stock is paying a dividend and you don’t need the capital (what you originally paid for it) for other purposes  the unrealized loss or gain is irrelevant.  The income keeps rolling in (unless the board votes to stop paying a dividend)

NOTE: Some equity investments can pay the income in interest rather than dividends – more details on why it is interest rather than a dividend will be in future blogs)

If however you bought a stock which does not pay dividend or interest income because you were planning to make a profit by realizing capital gains the current state of the market where thedemand for stock is dropping, your situation is more tricky.

So the capital value of your investment might be vanishing, and it might not matter due to the fixed income or if you need the capital and have to sell that is not good, a loss will be realized.

Mostly equity investors combine capital and income to achieve overall gains but leaning toward one approach over the other can be more appealing to an investor depending on their objectives and risk appetite.

More on this topic tomorrow.

Random thoughts – keeping you on your toes

Where does all the money go?

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The last couple of weeks the media have been on a glorified dance of doom and gloom about the economy.  This is a message that catches attention and so is step number one to a good story which leads to readership and associated revenue (whatever the revenue model is).

Some will argue the media goal is to share information objectively to keep the public informed, and while in some cases that might be true I believe profit is still an underlying objective (cynical me).

Economic Downturn Impacts

Investing to drive economic growth comes in a variety of flavors. Simplistically there are two classifications for investments:

– low risk investments which typically have a define fixed rate of return (fixed income) and often are “guaranteed”.  These are typically things like Corporate Bonds, Government Bonds, Guaranteed Investment Certificates, Bank Accounts.

– higher risk which usually are intended to achieve a greater return could result in not only no return but even loss of the original investment.  The most common of these is equity type investment and can include stocks, funds, options, commodities.

High Risk Investments and the Economy

At the summary level, monetary investment is a key way to drive economic growth.   Money is invested to enable more production (whether a physical product or service).

The increased production leads to increased profit which is returned to the investor.  Basically this is a key goal of investing.

As time goes by, if revenue and profit in the target investment continue, the return on investment continues.

So what happens when money is invested and production does not continue to increase or even worse declines?

Where does the money go?

Usually the low risk investments are not effected, it would require a long, deep and traumatic downturn like the world wide depression of the 1930’s to impact them.  This is not the case for the higher risk types.

For equity investments, when the economy climbs the monetary value of the investment rises and when the return drys up the monetary value of the investments drops.   So when the economy is in a downturn, profits drop or even worse turn to loses and so does the investment value.

Since the increase in the equity of the investment is based on demand the higher value just appeared – that is more money was not printed nor did the investment itself change so the increased amount of money someone would pay for your investment is just perceived worth.

The same is applies for the underlying income supporting the investment (for example the profit the company you invested in dried up).  The profit just disappeared, but the amount of money in the economy did not really change.

So in the economic downturn the monetary value of the investment disappears, but since it never really existed in the first place – did it really?

The answer to where does the money go is simply, it never existed in the first place so it did not need to go anywhere.

Disclaimer – This is a very complex topic for which only some basic concepts are commented on here, in future posts I will continue to build and explore this topic.

Random thoughts – keeping you on your toes

Learning from History – Not

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I am an avid reader of books.  I prefer fiction although and often treat reading non-fiction as focused education, useful but a bit of work.

When reading non-fiction I am usually am trying to understand a topic better and build my subject matter expertise while I treat fiction as more of a relaxing activity (that is not to say you don’t learn stuff from fictional stories, just in a different way)

Fabulous Christmas Gift

I received a copy of “The Devil in the White City” for Christmas.  It is a non-fiction history of the Chicago world’s fair and one of America’s first serial killers.

This is the best non-fiction work I have ever read.   While it is not a historical novel but rather a history (so – non fiction) it is written in the style of a novel.  The book is meticulously researched, full of quotes with clear citations listed at the end of the book.

 What about the Environment

“The Devil in the White City” covers a lot of ground giving a strong visual picture of the world as it was in the the 1890’s.

While the history includes a a multitude of fascinating information and facts, a particular quote from Daniel Burnham, Director of Works, World’s Columbian Exposition, 1893 (aka Chicago World’s Fair) really caught my attention.  Unfortunately it is as true a statement today as it was back then:

“Up to our time, strict economy in the use of natural resources has not been practiced, but it must be henceforth unless we are immoral enough to impair conditions in which our children are to live”.

As capable as the human race is over 120 years have passed since Mr. Burnham made this statement and sadly I am not sure we get it.

Random thoughts – keeping you on your toes

Life Long Learning

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Learning comes in many forms from the formal, to just straight up experiential.  Everyone is exposed to some form of learning moments  throughout  their lives, for many I would argue there is a daily chance for a learning experience.

Whether we absorb, store and ultimately how we use the learning we are exposed to (if we use it at all) is unique to each individual.   Some not only learn, but share what they have learned (teaching).

Formal Learning

Formal learning. which usually includes some form of validation (testing) and often provides recognition (things like a certificate, professional qualification, post secondary degree, license to practice, etc) is valued and the teacher(s) are frequently paid for providing the learning service.

Formal learning comes in a variety of formats from one on one teaching to classroom or online courses  and a plethora of variations and is sometime confused as the main and perhaps only way to “learn”

Informal Learning/ Take Care to be Aware

Keen observation and awareness of our surroundings and paying attention to each interaction we incur through out our day is key to attaining benefit from all the informal learning opportunities that come your way each day.

What did that communication you just received really mean?  The actions you just observed created a result, is there an identifiable root cause?  Is it repeatable?

The more we let these learning experiences pass us by the more we miss out the opportunity to build our knowledge and capabilities.

Youth as learning sponges

When we are young the questions typically come fast and furious.  This is just typical human behavior, these questions are learning moments.

As time goes by (and we grow older) the questions are less frequent and even sometimes discouraged or treated as socially unacceptable.   How often have you heard “enough, no more questions, just do it?”

Both the learning moments and knowledge sharing chances require patience – on everyone’s part.

Take Advantage

Consider the value and benefit to your own happiness from embracing the opportunity to make a key aspect of your life about life long learning, leveraging every chances you get both formal and informal.  Don’t let life pass you by.

Random thoughts – keeping you on your toes

The Schengen Agreement

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I have long been a believer the citizens of earth should be allowed free access to anywhere in the world.  This is not to say no countries or borders, just free movement across borders.

What about Culture?

As currently configured, laws customs and cultures around the world have a geographic specificity and national pride which is often a key underpinning for the support, maintenance  and promotion of the these concepts.  Often this is constrained by the boundaries of the country.

It is interesting to note though that languages and customs (the culture) can cross national boundaries and spread common practices and beliefs, as defined by regional commonalities, ultimately these cultural practices encompass multiple countries.

Most commonly the cultural, legal and economic practices are applied within a countries borders and the border is the clearly defined boundary which, when crossed, leads defines the change to your personal behavioral rights and restrictions.   That is you need to respect the laws of the country you have just entered.

None of this would be imperiled by having free access across borders.  In fact it is probably enhanced.

Why do these artificial constraints exist?

Is there a value to defining ownership of a country (albeit ownership by the population living there through their proxy leadership).  This includes deciding who can enter (and in some cases even who can leave) and how they can behave (the law of the land).

The only value I can think of is to the power hungry dictatorial (or elected) leaders who need territory to define their self worth.

Consider the Schengen agreement which covers a number of  European area countries.   The agreement was initially struck in 1985 and has grown since then to the point where today  free movement is allowed through all the twenty-six participating countries.  No border checks (imagine)

People are still expected to be able to identify themselves if challenged and to follow the rules the country they are in (countries still exist even with free borders – imagine).  The big thing is there is no border check to pass when either entering or leaving.

And it works.  Why have other countries around the world not embraced this advanced liberal practice?  Probably fear is the biggest driver.  Fear terrorists will have free rein, unwanted hoards will come to your country and ruin it,  your citizens will be overwhelmed.   You power diminished.

A Challenge

To national leaders around the globe, take a look a the approach adopted under the Schengen Agreement – it works, people love it and the world is a better place for it.

Random thoughts – keeping you on your toes

Crushing individual rights and freedoms for safety

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In North America, the rules and regulations governing individual safety have increased astronomically over the last thirty years.

A few common examples of this;

  • when I first started driving seat belts were optional, no longer.
  • a motorcyclist did not need to wear a helmet when I was a teenager – personal choice (or death wish)
  • bicycle helmets were not worn

Protecting Society – Individual Rights

There is a fine line between anarchy and reasonable rules and regulations, while still protecting the right to freedom of action and expression.

Today’s post was triggered by a reading of the Safety Codes Act of Alberta (SCA).   In particular the following clause from the inspections section:

“For the purpose of ensuring that this Act and any thing
issued under this Act are complied with, a safety codes officer may, without a warrant, at any reasonable time, enter any premises or place, except a private dwelling place that is in use as a dwelling, in which the officer has reason to believe there is something to which this Act applies and may, using reasonable care, carry out an inspection, review designs and examine and evaluate quality management systems and manufacturing and construction processes.”
Basically this means, if your home is being renovated and you are not living there a safety code office can enter and inspect without permission.
A later clause goes on to clarify that if you are living there, they can get a warrant to inspect your premises for safety violations and you cannot refuse them entry.  This based on a suspicion that a safety violation is occurring.
Safety First
I am totaling in agreement with safety first, controls, inspections and doing it right.  My concern is giving big bureaucracy so much power and discretion to decide if I am being safe or not is a little scary because of the potential for misuse.
The main issue is that power corrupts and absolute power corrupts absolutely.  We cannot expect our bureaucrats to be consistently reasonable or logical and giving this power in the name of “safety” does have value and I am sure it works to some degree improving our individual safety,  but I am sure it also has it’s fair share of abuse.
Random thoughts – keeping you on your toes

Process and Behavioral Maturity Link to Performance

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Both from a personal and organizational perspective high performance is integrated with the overall maturity of both processes and behavior.

Today’s post explores these concepts in a little more detail, still at a high level.  More detail and examples to come in future posts.

Behavioral Maturity

Maturity is about responding to your environment in an appropriate manner.  The higher the level of maturity the more closely aligned and effectively integrated are both response and environment.

Process Maturity

Processes maturity can be described as a ladder of increasing effectiveness in the employment and practice of the associated activities.    Using high level descriptors a five level maturity model could be defined as:

  • Level 1 –  Chaos  (processes are not documented, inconsistent and mainly adhoc focusing on whatever works.)
  • Level 2 –  Superman (processes existed but are scantily documented and not consistent.  A few practitioner are found to get things done – somehow.  These super people (trying not to be sexist) drive the performance and results.  Given they focus on “getting it down” this can leave a pile of dead bodies (metaphorically) in their wake.
  • Level 3 – Institutionalization (one clearly documented process exists for each activity and controls exist to ensure they common processes are followed consistently by all.  Communication of where the process library is confirmation everyone knows about it is key to ensuring standardization.
  • Level 4 – Continuous Improvement ( the institutionalized processes are constantly reviewed and improved)
  • Level 5 – Ongoing Measurement (confirming process effectiveness through defined metrics while practicing – e.g., continuous checking of the quality of a product being created while it is being created.

Performance

And topping it all off, where do high levels of behavioral and process maturity get you?  Intuitively is your actions are fully aligned with the goals (environment) and the tools exist to support execution of these actions efficiently (clear processes) the overall outcomes (performances) will improve.

Think about it, give it a try!  More details to come in future posts, comments and questions will be responded to.  ( The processes are in place here at Kerrzone and the behavioral maturity is high).

Random thoughts – keeping you on your toes

Celebrating Failure

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Seems odd to celebrate failure, in fact there is a lot of strong rationale for this practice.

What is failure

There can be a few nuances to the definition of failure, for the purpose of this discussion let’s view it as not achieving the desired or intended objective.

Success is basically the opposite, that is achieving the desired or intended objective.

Both success and failure have an associated order of magnitude.  Sometimes they can be very close.

For example, the objective could be to make revenue of $100,000 in a given month.  If the actual revenue is $98,000 the goal was not achieved (failure) while revenue of $102,000 exceeded the goal (success).  In the overall scheme of things there is not much difference in this performance.

Failure does not sound good, why celebrate?

Although Yoda (a deeply philosophical character from the Star Wars movies) states “there is no try, do or do not”; and it sounds good, the reality is if you don’t try you are almost assured neither do nor do not states will be achieved.

Celebrating failure has an interesting ring to it and usually get’s peoples attention when I talk about it.  The intent is to recognize the attempt.  Recognition has been demonstrated in numerous physiological tests to be an effective motivator, a way to encourage repetition of a behavior.  Celebrating failure is just a form of recognition (read on …..)

Setting a stretch goal, should result in failure more often than not – I would argue it’s hard to classify as a stretch goal if you can always attain it.   So we should all fail on occasion.

Acknowledging, recognizing, even encouraging the behavior that led to the failure provides reinforcement of the effort.  Although it’s a simplistic statement, consider; “if you did not make the attempt it’s unlikely you will achieve the desired result”.

Motivate through recognition

In a leadership role I often hosted team sessions to review and discuss results, both bad and good (i.e., success and failure) to encourage a continued drive toward achievement.  To be clear, these were never about criticism or what went wrong, but as Mary Poppins sang – “accentuate the positive”.

The results spoke for themselves.  Instead of failing which can demotivate and result in a downward spiral (losing teams continue to lose) concentrating on the positive aspects stopped the downward slide (it’s not bad, it’s really good and here is why).