Loosen or tighten? (The listening continuum)

Do we really listen to people? Of course, it is too easy to say yes, but… really really? When we’re listening to someone, do we realise that the other person is right from her point of view? Do we see how she has structured her world, the fundamental ideas that underpin her thinking, how the themes emerge from them, how the thoughts are constructed? I ask again, do we really listen?

The listening continuum is positioned between two extremes:

• In one side, we can choose to “be taken over” by the story, falling in love, getting lost. Our world gets filtered by someone else’s lenses. That is loosening.
• In the opposite side, we are there with a purpose. The more that we hear something that doesn’t fit in our agenda, the more we internally react, the more we internally tighten. Every word is filtered through our lenses. That is tightening.

You tighten when you read a work report. You loosen when you read a nice book. In the first case you have a purpose: to extract the relevant information. In the second case you open yourself to a new world, and enjoy.

This is why, when a friend is in need, you have to loosen first. To try to understand the other’s perspective, not to give advice, but to empathise. Otherwise you will never get it. As you will never get poetry, or you will not ever fully enjoy a book. Yes… you were trying to reach the end and to know what finally happened, but that was wasting a book too. You should have loosened.

That’s why no one can really enjoy a powerpoint. No matter how hard you try. It can surprise, impress, but make you enjoy? Open a new window of fuzzy tones to restructure your thoughts? Never ever.

Try listening credulously next time!

Beware the truth (evidence-based management)

Lately I have been observing a lot of cognitive dissonance. Okay, rather a strange way to start a post, let me rephrase: “people hear only what they want to hear”. Now it’s better.

Not really an universal truth, but true of those who don’t have an ordered mind. We all tend to interpret the bits of information that conflict with our view of the reality as “clutter” and those who fit with “truth”. Because otherwise we would be wrong somehow, and we would have to rethink, and that would entail consuming a lot of energy (up to 25% of your energy consumption assuming you, reader, are human), and our brain wants to preserve energy, right? Then our brain has a lot of interest in not changing what it already perceives as truth.

And specially for those in charge. How can they accept that they make mistakes? How can they see that they are not as good as they believe themselves to be? How can they understand in an environment which will adulate them no matter what that they are imperfect? They don’t. It’s always easier to blame the others, essentially the weaker ones.

Evidence-based management needs to come to the forefront. Take benchmarking as an example. We try to do something that has worked for another company. But do we think about the full span of assumptions that we’re doing? Was the thing that we’re copying the cause for the other company’s success? How does that value chain work exactly? Will it work in our case and why?

Even if we start compiling evidence, which only a few managers do, we may end having too much. And which evidence does really apply to our case? How are we sure we are seeing the causality links in the right way? Are we maybe focusing on the least relevant issue and ignoring the one that’s really paramount?

A doctor could never diagnose a patient without proper examination only based on previous experiences. Yet many managers do that every day. Does that make sense?

Even when you’re in a hurry and have the pressure to act quickly, encourage enquiry and observation. It is the right moment to do it, even when it feels quite the opposite.

More inequality or more convergence (tricks of your particular worldview)

The average Joe in Spain is now living worse off than in boom times. Anyone can tell you that. While some, many, citizens, scape the crisis altogether. Apart from the platitude as obvioulsy societies live better in Boom times than in Recession times, anyone can warn you of growing inequalities, and he will be right.

The same feeling you may have if you look at the landscape in Mumbai, India. As skycrapers grow in number and height and slums grow and invade previously green spaces, you may have the feeling of growing inequality, and you may be right.

Same feeling you may have in China, when you compare Shangai with some backward province. They would have the biggest slum on Earth if people had the chance to build it. But since they don’t, you cannot see it. But as cities expand, inequality is growing. Signs of danger in forthcoming times.

But if you think of great times, regardless of your point of view, you can think of the Mughal Empire, the Roman Empire, or even of Chairman Mao’s China, and think that the good times are behind.

But don’t make a mistake. In those glorious times, 99% of the population were at the limit of starving. Marie Antoinette may have lived as a Queen, but she ended beheaded for a reason, a reason that she could not understand when she suggested to give cookies to the mob if they were hungry. Any bad harvest could kill a sizeable chunk of the population, and if there was hunger and disease at the same time, half of the population dying was a possible scenario.

Since the industrial revolution in the Nederlands, UK, and some European locations, the things have changed. As it has been spreading all over the world, inequality is less than ever. And if some folks live worse off, is specially because they compare themselves to their richer cousins.

No one starves in Spain. Many people have made bad investment decisions and they will pay a price for it. Some will not be able to afford the holidays in Mexico this year so they will decide to stay at home. Some people I know have had to cut on Saturday restaurants. And some have real trouble to get to the end of the month, yes, but not hungry.

Many people in India and China are still starving. Many more are hungry. Obviously, too many, I may add. But less than ever. Mao’s China was probably the poorest in centuries, but Deng Xiaoping opened the capitalist way that is slowly (yes, if you think of all of China, not of the booming part only) reversing the trend. The same happens in India (and sooner it would happened if the current government was as brave as some that preceded them, instead of wasting India’s time).

Of course, if you look locally, there are some losers and some winners, but humanity wins. And if you look at the greatest foes of this 2012, you will here about debt affecting many people, but you will here a lot about public debt. Don’t blame that one on the capitalist system, blame it on bad governments.

The world overall is more equal in opportunities. More than ever. Capitalism, with its flaws, has started a globalisation trend that is only benefiting humans.

Poisonous debt (…to the point of no return?)

Nixon is known to many people for only a few things we did. But only economists remember that he was the one to definitively unpeg the dollar to the gold. That happened only 40 years ago, in 1971. I wasn’t born yet, but it’s not a long time in the long history of money.

Much before then, since Bretton Woods, the dollar became the facto the centre of all currencies. That was 67 years ago, again not so long in the history of money. Let’s say that the present order of things is not ancient or anything like that. There were many other currencies before, not just one, and they have been changing through the ages.

But this post is not about which one will be the next currency. It’s about the possibility that everyone avoids thinking about. What if the current monetary order is living its last days?

We didn’t know how much sovereign debt a country could stand. Now we know: some figure close to 100%. And many countries are in that range. The US being one of them. Governments have two quick options: either borrowing more money, or printing it. Austerity measures, if they are not to be counterproductive as they can destructively contract the economy, take a lot of time. (And I’m not sure that politicians or creditors are the right ones to design, choose and enact those measures.)

And debt is good! It’s one of the lubricants of progress. Let’s not demonise it ever. But there’s some quantity of debt which is too much. Now we know how much is that. And the rich countries seem to be beyond that line, namely the US, the one that everyone takes for granted that its default is unthinkable.

Maybe that’s why they don’t think about it. But not thinking about something is not a guarantee that it will not happen. Maybe it even makes it more likely as nobody is actually working to prevent it till it explodes on your face.

So, will the US default? Well, they don’t need to. As many other governments they can just keep printing more and more money. The default becomes unnecessary as inflation will do its bidding and do a covert default. Your investments can’t withstand the storm when they are based on a currency which is losing its value. They apparently can, yes, but only apparently.

And that’s because the system was based on a promise: that the authorities were not going to print too much money. But again, an easy way to get dollars (or euros) is to print them. But then what happens to a fiat currency like the dollar? (One that has been unlinked from the gold value for 40 years now.)

It’s easy to hold to the promise of not printing more dollars when investors are there to lend you the money but, what after they are long gone? Are the politicians going to keep their promise of not printing more money? Do they actually have an option?

Now it’s your turn to do what Anna Hazare did (and I don’t mean fasting)

Many people will not know who Anna is. Yet, without knowing him, everybody can sympathise with his cause: the crusade against corruption. Anna was on a fast to death with the only objective to get a less corrupt India, starting by officials, politicians and judges. And he wanted to see it written in a Parliamentary bill before he died. Finally it seems he will see it, and live as well.

Corruption means that a sizeable part of the resources of one country go to a few deep pockets taxing the future of the same country. Because the price to pay for corruption is much higher than the resources it drains. Losing the faith in the system means that less people will be entrepreneurs and more of them will fail. Means that many people will think of sending their wealth abroad just to protect it. The externalities of corruption are always very complicated to measure, but by all means they have a huge impact on a nation’s future.

Anna has made this country’s politicians to humble and start passing a bill against corruption. Bills are that, bills. Still they mean little if they are not properly implemented. When the viceroys of the Spanish empire got some law from the king that they didn’t like, they said “acatese pero no se cumpla” which means accept the order, and then do not implement. Another clever minister of the Spanish empire, Romanones, said “que otros hagan la ley, que yo haré el reglamento”: let others do the law, and I’ll write the rules for its implementation. Anna got an unanimous vote from those who first chose to ignore him, many of them too close to the corruption sin. Finally they decided to support him, but how will they implement, legislate, behave once this tide has gone away.

I wanted to use the Spanish reference to highlight that this is not only an Indian problem. But again, everyone must do its part. Anna did. But corruption on a massive scale cannot exist unless lots of people participate in it. Even more, it is necessary for a silent majority to tolerate it. Anna has, for once, resonated with this majority in order to make the complaint heard. The complain that is usually only whispered at work, or shared with friends in closed circles, now has been voiced aloud but, will it still be tolerated?

We all have to do something. Just as Anna did. But it’s not fasting. It’s about talking aloud. It’s about not profiting from corruption. It’s about whistleblowing. It’s about doing the right thing.

And we are no longer asking “why” to the crisis

It’s amazing how we tend to forget. Not so long ago some people were still being blamed, bankers mostly, the beheaded god Alan Greenspan, some professional confidence man (aka con) Bernie Madoff, and a few more, but except for the latter that has even seen the disgrace in its own family, the former have gone back to their oversized bonuses and Mr. Greenspan is enjoying a deserved retirement, maybe with less conferences than what he had hoped for.

We’ll end up believing that the crisis is more a natural catastrophe, like those earthquakes in Japan, than a punishment. Isn’t it always easier not to blame yourself? God, with infinite power and without any need for an explanation, has just decided to punish you. And that’s all. Why think? Why blame? Why even change?

A system that privatises gains and socialises losses can’t be good. And that’s what we are seeing all over the world. All citizens end up sharing the burden. The “too big to fail” has been finally accepted by the whole humanity, the final enshrinement of the “moral hazard”.

Maybe we have finally reached our destination. We are capitalists when it’s time to reap benefits, but socialists with losses. Be aware, that only applies to big corporations. Finally, the richer 5% has some way to outgrow us all, to keep concentrating more and more power in their hands and make sure that when they fail they won’t have to answer for it.

I read today in the news that this year General Electric, in spite of a huge profit figure (true, it could have been better but it’s still huge) is only paying 7.4% of their profit in taxes. Congratulations to their accounting department, finding every possible trick, every crack in the fiscal legislation, every opportunity not to pay… But, at the end of the day, do you feel like they are making the same effort as citizens are? How much do you personally pay?

And another example, this time from Spain, from the likely next president in another year, a sentence in a conference in Germany: “If Spain is having a bad time it’s not the Spaniard’s fault”. Whose fault is it then? The hidden external enemy? God’s?

Beware, things that do not work can’t last for long…

New roads ahead both for me and Warren Buffet (To India or not to India)

Decisions. Whether to leave or stay. Leave from where? From India or to India? I’m not even sure of the right declension for the verb leaving.

And in the following days I do have to make a decision. Sorry for spitting it all out here, after so many blog-silent weeks. I’m in the midst of accepting an assignment here for at least three years. And the decision was already taken, yes, but as the conditions keep changing the decision needs to be remade now and again. It is said that we join companies and we leave bosses, this case could be right the opposite.

But enough about that, whatever you write can be used against you someday. Today Berkshire Hathaway has its figurehead Warren Buffet visiting India with a humbling attitude. He says he will talk to the Prime Minister, Manmohan Singh, about whatever Manmohan Sing wants to talk about. He also says he’s late to be in India and that from now one he will make a big investment per year in this country. He also says, and that’s why I called him figurehead, that the guy that makes the most money for Berkshire Hathaway is not him, but an Indian as well, in charge of the insurance business. Obviously the Indian press have quickly jumped to call him the heir.

Such a great entrance! Humility around an iron fist. Ladies and gentlemen, there is no business as show business. This is what I call the new American soft power. Humble but right to the Prime Minister in a country where business still relies on personal contact! They know how to do it. Actually, if I could, I’d join their ranks right now.

My road is humbler indeed. Not to be leading a huge investment company with resources aplenty but to develop business in India. A tough job. Another learning experience and, hey, in the end it’s all about learning. But also means leaving behind other personal development experiences and obviously a very important part of my life.

What is it that I want to be? Where do I want to be in five years time? I need to figure out as soon as possible as only then I will be able to make the right decision.

When you cannot longer recall how many times you’ve been to India

When you do not longer wonder by hearing the expression of “doing the needful”, when you realise that there are other ways of thinking, and by being different they are not better or worse (an easy temptation that leads to failure) but just different, when you see the order in the chaos and walking in a Mumbai slum doesn’t make you cringe anymore, when you are being told that you may have Norwegian accent (yes, me), when you use the words yaar and walla as basic words, when you learn to walk under the rain (and I mean really walk under the Monsoon with a smile), when you repeat the verbs twice and ask no at the end of the sentence, when you get used to see very simple people smiling, when they do not longer chase you for money, when you realise that being in a crowd is a different way of being alive, that’s when you start loving this country.

Because India can and should be loved. There’s a layer of dirt, a crust of inefficiency, true, but there’s more than that, much more. There’s this will to move ahead, this aim to be, this sturdy yet huge democracy, this terrible mother mistreating her children yet, somehow, still loving them.

India changes you. And does so from within. Makes you better. New connections in your brain. Not linear ones, true, but since when humanity has traveled a linear path? Never. India is as organic as a human body, as imperfect as any of us. Yet it thrives as any of us can thrive. It’s a unique opportunity of developing a diverse society without resourcing to authoritarianism. A path that many others we’ve left behind may follow.

Once you’ve been here, really here, I mean, you’re never the same. A part of you never leaves India, and a part of India comes with you.

From Germany to Spain by train (the Eyjafjallajökull volcano and a “laisser-passer”)

Yes, I was one of those people stranded around Europe thanks to a cloud of ashes that no one could see but make brighter reds at sunset. My journey was a 42-hour journey through Europe’s interconnected railway connections, but also an eye-opener on the frailty of globalisation and a living proof that the railway systems of the European countries are not effectively interconnected.

Belgium is a good example. Ongoing works on a track to Liege. No way to get there on time, but with a 15-minute delay. A train loaded with people that are connecting to the Thalis, a high-speed train taking people directly to Paris and Brussels. Two trains leaving at almost the same time we arrive. They hold one for a few minutes and, to the travellers’ consternation, let the other one go. A whole journey ruined because of a three-minute coordination error. Lots of wasted space on the leaving train, lots of upset passengers that need relocation on the station. Belgian management at its worst. Fortunately a compassionate soul understands the disaster they have caused and change my first class tickets to Spain for some piece of paper: a “laisser-passer” (let him pass, a safe-conduct). With it I can sneak into any train, no seat assured, but if there is a seat, I can take it. That was the key to my escape.

A journey away, in Brussels, the Belgian capital, lots of people queuing at the counters. People sitting and standing everywhere. No trains to leave. We manage to sneak into one. Half of the places were free!

Then in Paris. Train workers on strike for the 14th day. No way to get info in Paris Nord. In Paris Lyon we are stopped by some first-attention workers selected, I guess, by their ability to mutter some words in English. Totally unhelpful, there are no spaces in trains for the next three days. Everyone should go home. The poor bastard even doubts that my reservations are authentic and asks me for proof. Amazing.

Next stop at Paris Austerlitz. Instead of flocks of British citizens trying to get their chance as in the last station, this time it’s crowds of Spaniards there trying to get home. No places till Saturday. I manage to talk to a nice guy from the company which tells me something that I’ve already heard a couple of times before: “hold on to that laisser-passer, that’s the best thing anyone can have out there” and then shares some secret with me “there’s going to be some special train service taking people southwards to Toulouse tonight at 21:56 at Paris-Bercy station”.

That was another key moment. The secret train. One of those trains that France has put up in order to help travellers through France.

Paris Bercy. That station does not even appear on the maps. (Just check it, amazing! It’s not Bercy metro station which is in the centre of Bercy, a huge borough) I had to go back to my source and ask for some references. Not even the taxi driver knew where Paris Bercy was. Fortunately and thanks to my confident I knew it was just after crossing the Bercy bridge over the Seine. Once there, there were some sign.

The station is used to transport cars by train. It’s an auto-train station. They have added some passenger wagons to a huge line of car-transporting wagons.

Ten people controlling the entrance, god forbid that some crowd would jump onto the train to get home. I’m sure they would only select the travellers really deserving it, the desperate ones, the children. After all that’s what was in the news: France doing all they can to help expatriates get back home.

Fortunately, my “laisser-passer” worked. They seemed to be impressed by it. I know it’s going to end up hung up somewhere at home. We could board the train… and then we left for Tolouse. I was to share my journey with a lot of refugees, sing songs and share experiences, or so I thought.

Well, you can see the reality. Fortunately there were two people to talk to. The rest of the train was empty. I guess they had a tough time deciding which of those refugees deserved going back home. So they decided not to let anyone go. These are the trains, the special trains, meant to be helping people get back home. And that’s how they go: empty.

There were still a lot of things to come. The 14th day of railway workers strike in France cancelled the following trains I hoped to take and I had to make it in a bus to the Spanish border. There I read again about the special resources countries were providing to help those stranded get back home. Astonishing.

Yes, resources were there, somehow. But totally uncoordinated and wasted. Here lies the proof of the case against European efficiency and how politicians and media speak of things they don’t know about. In the meantime, the non-transported travellers mean loses both for them and the companies they work for, for the airlines and for the whole Europe. Another notch down the economic crisis that is dragging us down.

At the end of the day, the Eyjafjallajökull leaves us with lessons on how the globalisation is frail, too frail. Myself, I should be in India now. Instead I’m at home in Barcelona, and happy to be here by the way. Is the air transportation sector so frail to completely collapse under some ashes? Is the railway transportation system so inept that it just wastes more and more resources while failing to respond in an emergency situation? Why are the politicians lying to us so blatantly about the extra efforts they’ve made to help people get back home? How can railway workers just keep on strike in this situation and Mr. Sarkozy simply do nothing about it?

We are less prepared than we think we are. And we must get ready and push towards open skies and build the next generation of air navigation systems the sooner the better. Also it is necessary to overhaul the whole inefficient European rail transport system.

Experiences. We all learn from them. I also try to. And from one reconforting image, the most positive thing the volcano did (as if telling about our shortcomings wasn’t good enough…) the impressive sunset over the Seine in Paris, the one thing that has improved and turned even more reddish with the Eyjafjallajökull’s ashes.

Basic macroeconomics again: government savings, private deficits and the Ricardian debt equivalence theorem

If you brush up your basic macroeconomics you will remember this: in an open economy, if national saving is insufficient to finance national spending, an influx of foreign capital will be needed to balance the accounts. That’s the story of the US -or Spain-. Where we invest (spend) more than we save (earn).

In times of high leveraging, where the private sector has grown too indebted, a deleveraging process is mandatory. Whether it takes ten or five years, it doesn’t really matter. It has to happen. It will happen.

But what if it’s the private sector that has gone too indebted? How can the public sector help?

Well, it’s not only that, as I said, the national balance must equal the foreign financial balance. The fact is that the national balance is necessarily made of two balances that add to each other: the public sector balance and the private sector balance.

That means that the fiscal balance plus the private sector balance must be compensated by the external balance. In other words: money goes out of one sector only to enter another, whether outside or inside the country. But it’s a zero-sum game.

Worrying.

If the government is saving, the only way that the private sector can save is by means of exporting, suddenly, a lot more.

Otherwise, more saving by the government, means more private sector deficit thus more leveraging.

Hmmm, sounds ingenious, but makes sense too.

Can we expect all the countries to suddenly double their exports? No way that’s going to happen as exports are also a zero-sum game. What someone exports, someone else is importing. So, what’s the alternative?

Let me say it again in plain words: if the governments reduce their debts is because part of the taxes that are being paid by the private sectors will be committed to paying creditors, that is, they will go out of the cycle. More taxes, less returns in services or infrastructures. Yes, that is, hurting the private sector.

What can a government do to reduce the debt burden? Obviously, inflate prices, which in times close to deflation is no simple task to do. But again reducing the savings of their citizens, whether people or companies.

But it has to be sudden, unexpected. As creditors wouldn’t accept low interest yields if they were expecting inflation. Credibility is important and we don’t want to lose our reputation as a country.

Let’s say that you can only lose your reputation once, just like your virginity. Next time you won’t be able to make this move or to get credit at such low rates.

So, what’s the alternative to increasingly indebting the private sector? Because if you do for a long time, the increasing frailty will become evident, more than evident, obvious.

Let’s increase debt to reduce deficits? Bonds maybe? Some safe heaven for governments?

Maybe they are for governments but, in the end, they must be paid off sometime. The contested Ricardian debt equivalence theorem states that government expenditure on the private sector is equivalent whether it’s financed by taxes or bonds.

Okay, there’s a lot of restrictions to that Ricardian debt equivalence, or Ricardo-Barro equivalence proposition. We may not care about our descendants so we may not care to indebt them either. But one thing is clear: a debt is a debt and, along the road, it must be paid. The equivalence says that, somehow, the private sector will get ready to pay that and the ultimate effect will be the same.

The lesson? Damned if you do, damned if you don’t. Maybe getting government deficits under control right now is going to make the economy even worse. Believe me or not, it doesn’t matter. Just do something for me…

Stop seeing the government deficits and debts in isolation. They are part of a bigger system.

At the end of the day, there’s the need for more competitive if countries are to scape the leverage trap. And productivity adjustments come with a high price, be it devaluations where they are still possible (beware your reputation, U.S.) or by means of drastic reduction of labor factor costs… yes… wages (beware Spain).

Okay, that was tough. Sorry. Not the usual me. Lots of theoretical threads I needed to spit out. Oh, is it going to be the first post without a picture?

No way! Here it is. Commonsensical: