When Investment Banks Kill

Traditionally, investments bankers were always easy marks for derision. The affectations, braces and bordeaux and easy to see and easy to mock. But, the basic equation made them advisors and the goals of the most of the ambitious were to one day be a principal of the deal or transaction. There was much to admire in their counselor role--in fact, we once created a brand strategy based on the thought that our client bank were 'counselors to kings' and communicated their ability to enable the vision of a CEO through intellect, creativity and muscle. With the client front-running, technology and proprietary trading which dominate all the major houses, this isn't even a strategy most firms aspire to. Yet, this is still the formula of a successful banker that CEOs and CFOs look for and need.

But, where are these counselors to kings. Bankers focused on being long-term advisors, enabling the vision of good management and the growth of companies and the creation of value for the society are not readily apparent in the public debate. In the chaos of the corporate investment banking world there is huge churn--the bulge bracket firms compete with clients as often as they service the. Lehman, Bear and Merrill all gone. Middle market mainstays like Jefferies have continued to grow. (Un)surprisingly, they are lead-managing major deals with the likes of Goldman-Sachs and Morgan Stanley and at this scale and with a newly developed appetite for the bulge, it's not likely that they can offer the same type of entrepreneurial creativity and tenacity to smaller companies on the way up. The boutiques are apparently consigned to developing their brands and businesses one deal at a time and flogging themselves on blogs and chat rooms and conference rooms. They are small and they seem smaller. Clients in moments like these are also whipsawed by the chaos. There are more choices and more regulations and more public opinion to be mindful of. There are fewer names which bring any certainty of success. Many firms have given up for the time being on communicating market relevant brand values and have avoided taking any leadership positions on the issues that trouble us. While obviously politically incorrect for any CEO to admit ignorance of even being mystified, the fact is that no one has a clear handle on the strategic possibilities available through investment banking and corporate finance. Everyone is grappling with a mountain of conflicting data and opinions. And added to that mix is the fear that while your banker is selling you, he's also selling you out.

Every C-level manager at any significant company has even more reasons to hate the investment banker. There are too many opportunities in too many situations for the banker to exert his firms agenda over the clients. The power and scale of the bulge bracket firms far outstrip all but a select few of the global businesses looking to acquire, merge, capital raise or otherwise strategically plan finance. Every one of their private equity practices can compete with most any enterprise. The advisors are now the adversaries.

This is one of those moments where brands are made or broken. The current economic and cultural climate is focusing eyes and ears on the financial services industry. The focus right now stems from a wide variety of industry factors--flash trading, dark pools, CDOs, the mortgage meltdown, the bailout and from a confluence of related forces--ill-informed journalists and bloggers looking for hits, naive and pandering legislators looking for votes and others. But this is probably a transformative moment where some of the traditional models of banking and finance and the value chain between bankers and clients is essentially changing.

Like any inflection point, there are opportunities for new losers and leaders to surface from the chaos.

Out of this maelstrom, a brand is surely to rise, addressing the truths (in so far as there are any) of this crazy marketplace. As investors have become less and less empowered, they've become more and more sophisticated and understand, whether at a micro level or more intuitively on the macro, that the game has changed and that people are clinging to old behaviors in desperation. It isn't surprising that G-S runs ads about their philanthropy during bonus season. Most large firms won't take a public stand, because they're already too complex and inter-connected. Most small firms want to act like big firms. And, while much of marketing is exhausted, the need for fully realized brands that are competitive and relevant, screams out.

The 'white space' for a competitive brand in this environment is to address reality. Call the fear out. Leadership brands create the dialogue, they address issues and become meaningful. Straight talk through a combination of market validated performance and intellectual capital that leverages the experience and perspective of their senior management. Heed the fact that everyone is tired of the bullshit. Understand that clients require someone on their side, working their agenda. Until, the machines began trading without any human brainpower or supervision, the most valuable thing on Wall Street was integrity and creativity. If the firms in this industry allow the creativity to be focused only on faster and darker machines, it will be at the  expense of the integrity. The machines don't have judgement. The don't have vision, understanding and they don't enable a CEOs dreams. They only trade.

Tiger Woods: I'm Shocked. Shocked To Learn There's Gambling In The Casino' originally posted 1/15/10

Oh the hew, cry and shock we've shown at being clued into Tiger Woods' lifestyle. Of the many aspects of this that gives one pause, a few additional comments: 1. his arrogance and omnipotence: a thirty-something who's made over a billion dollars. His world is a bubble floated exclusively by and for the people with only one job--service Tiger. Yes Tiger. That's amazing Tiger. You're right Tiger. He goes nowhere, speaks to no one, buys nothing without having first had someone set it up for him. 2. the cocktail waitress and the party planner. We've devolved to the point where celebrity is so all-pervasive that celeb service workers are transacting in the glow themselves. Could anyone have predicted that we'd see headsets and clipboards become status symbols? 3. pro athletes all have groupies. See Claude Raines' 'Casablanca' title quote above. Ever been in the lobby of a hotel where an NBA team is staying? Ever read a rock band tell-all book? Ever read People? The Star?US? Of course we have. But the pious and sanctimonious copy pouring out of mass media is because moral shock is the only handle any of them have been given as a lead to cover the story. Greater minds than mine are required to parse why bottom-feeders like these groupies, like TMZ or Radaronline can assume outrage when their brands are based on their own sleaziness. However, the outrage at Woods is fake and will only last til the audience gets bored with the angle. Because it's not the sex--see Kardashian, Hilton, et al who've used scandal to move up the food chain. It's not marriage--see Bryant, Spitzer. And I don't think it's this great disparity between the 'nice young man' imagery of his branding. 4. talent drain and laziness. The media could find another way to cover this. Woods' handlers could try strategy other than 'he's using this time to work on himself and his family to repair the blah blah blah and we ask you to respect the privacy blah blah blah'. The surfers and the bouncers who make up the reporting staff at TMZ don't have the ambition or the skills to look for a story. The current methodology is to get in the way of the story--or the SUV on the way out of the club/hospital/barneys. Tiger's management, and given the size of the Woods business, is large, highly paid and has access to anything is stuck on a playbook that's become a reflex for a celebrity in trouble. A Counter-Intuitive Strategy Approach the public with the truth. Understand that they viscerally understand the way pro sports and entertainment work. Explain that in the life of a Tiger Woods, these situations are everywhere. That groupies have been part of this world and handlers get paid to smooth it out since people have been famous. That it's not only Woods is behaved scandalously, it's the reporters, PageSix, his fellow players, the networks, the law firms and the management companies. Woods already lost the Accenture deal because the gap between the 'ideal' and the news was too great. More importantly than any single endorsement deal is that this whole fandango revealed a fatal flaw in the Tiger brand strategy--no authenticity. In the culture where almost everything is plastic, authenticity is the most valuable commodity. The only chance to get some back is to suck it up and face the world with the real story. What would the lead to the story be then?

G-S: Is It Surprising? post script

this from the Senate hearings 2 days ago:

the G-S sales guy, Fabrice Tourre who sold some of the much-discussed securities said in an email

“...a product of pure intellectual masturbation, the type of thing which you invent telling yourself: ‘Well, what if we created a “thing,” which has no purpose, which is absolutely conceptual and highly theoretical and which nobody knows how to price?’ ”

There's no way to top it.

How Do We Get So Dumb

Thomas Jefferson made a point of distinguishing between facts and
the truer facts. That’s an exercise business would do well to bear in mind right
now, because reality is not what it used to be. This is not simply a matter of recognizing that a woman’s Size 8 morphed, somewhere along the line, into a Size 6. Although that
seemingly trivial recalibration is probably more important,
metaphorically speaking, than a lot of corporations are willing to admit.
This is about customers, employees and executives who are living in a fourth dimension when it comes to the truth. We are all familiar with fat people who believe they are on the
stocky side, malicious prudes who see themselves as do-gooders and financial officers who’ve convinced themselves that they have the stockholders’ best interests at heart.
Such people are emblematic of a widening social phenomenon. It is as if we as a society can tell the difference between what is real and what is fake but only when pressed. That is, only when we are forced to make a special effort.
Why else would Sally Field, Jessica Lange and Sissy Spacek get to testify before a Congressional Select Committee on the plight of the American farmer? Their qualifications? They had all starred in movies set on farms. And how better to explain the Internet bubble? Along with the legions of people who repeated mantra-like that the stock market would continue to rise because people have to put their money somewhere and where else are they going to put it? Remember when colleagues looked at you funny (or grew hostile) if you even suggested that the party might, just might, someday have to come to an end? In the year 2000, Internet stocks represented 20% of all publicly traded equity volume. Even though the sector never made a profit. Was it five or ten trillion dollars of paper wealth that vanished in the bust? Does anyone even remember.
When the bubble finally did burst, I happened to hear one highly placed Wall Street mandarin sum up this particular history lesson in the following way: Never again, he said, will a 25-year-old with purple hair and a nose ring get to make a presentation at
Goldman Sachs. By saying that, he inadvertently confirmed that he and everyone
else at the top of corporate America was quite capable of distinguishing fantasy from reality.
But only when pressed.
What you might call business fantasy has become a fireball of media hype that inexorably feeds itself, creating ever more impressive pyrotechnic spectacles.
It has produced the phenomenon of ceo’s as rock stars. And made cnbc a kind of corporate mtv. More seriously, it made it possible for the mainstream business and financial press to present, as the next great thing, companies
like Enron, Tyco and WorldCom.

originally published in 'Managing the Apocalypse' 2005
MANAGING THE APOCALYPSE

Goldman-Sachs: Is It Surprising?

Like everyone else, I'm listening to the dialogue on Goldman's most recent media-worthy transaction: the creation of the synthetic CDOs for Paulson and sold to DB and others. Above the title actors in this movie include the president who loped into NY yesterday to shake a finger at Wall Street. But doesn't most of this hand wringing and grand standing sound pretty naive. Or worse, sound as if there is another huge misdirection going on. As the heathcare debate lost meaning and clarity with talk of death panels, the issue of financial reform is already sinking under its own weight. Some simple observations: Is having clients on both sides of a trade unique? No. IBs are in the middle of transactions all the time. Is trading gambling? Yes. Is gambling illegal? No. While we're talking of financial regulation, is there a clear end to 30+% interest on credit cards? No. The fundamental issue, it seems, not whether parties were betting on outcomes, but if there were any real assets attached to the paper they were betting on. All of the jargon shouldn't distract from the fact that there's nothing to a synthetic CDO. There's no where to go when it goes bust. And that might be a basic change in the model of commerce. Where once the model was based on things--companies, factories, inventories, receivables, etc--now it's based purely on math. As we're learning over the course of the meltdown and the current recession-based recovery, there aren't any houses attached to the mortgages in the mortgage-backed securities in the collateralized debt obligations mirrored in the synthetic cdo's. It even possible that's there isn't enough blame to go around. For as the winds of babel swirl, forgotten is Barney Frank's role in democratizing home ownership and the right to mortgage regardless of means. Lost are Countrywide and Lehman and countless brokers, originators, boilerooms and packagers who had no attachment to real property of any kind. Lost is the nonsense of Sarbanes Oxley, ironic that the 'transparency' regulation is utterly irrelevant on these invisible investments. Lost are the ratings agencies, who did what they've always done--rubber stamp the goods of their paying clients. The rise of the technocrat in modern finance enabled new formulas for a new, shadow market. Based on reflections of other financial objects, their science was so sophisticated that markets were created to buy and sell nothing but the idea of the investment. Now politicians and pundits are getting off sound bytes about 'not contributing to the economy', but all of this stuff generated billions in fees, bonuses, travel expenses, Hermes bags and Greenwich ice skating rinks. They're railing against something new with an old handle. The object of their wrath isn't the contribution to the economy, but the concept that so much happened--both p and l--based on nothing. There are so, so many causes of our current condition--the rise of the publicly held advisor, the loss of the partnership, the decline of manners, the rise of the machines and dark pools. Is it all inevitable? The technology that drives every aspect of the modern world is shifting the culture right out from under the feet of everyone under 33. The world is run on code. Whatever is written here, or in the WSJ or the briefs being filed right now against and on behalf of Goldman, are words only in appearance for it is unrecognizable code that will make them part of the ether and part of modern reality. And, if you've developed websites or algorithms you know that the thought process to develop that code is completely different from writing words. The differences here are the divide between the analog and the digital. There is no judgement in digital. There is no nuance. If it can be done, do it. The abilities of the technicians beings hired by the most successful hedge funds and banks go far beyond the current scope of finance, accounting, law and investing. Science will keep them advancing. New laws and regulations will attempt to rein them in. Management needs to decide what their brief is--win by scorching the earth or not. And management needs to control them. Markets are designed to create winners and losers and enable the exchange of value across players. Markets in the past were always driven by humans with judgement, ethics and experiences which tempered trades based on stuff--the debt, equity, receivables, gold, cotton, pigs--tangible, seizable stuff. Everyday, new code is written to reveal a new way to make a penny. This code operates at the speed of light, without human supervision or operation. The codes trades on the code. The code get progressivly more abstract and detached from the stuff we traded in the past. Smart people and history teach us that markets will out. There is pain and anguish, but precedents show that markets get what they deserve. If we are truly entering a different age, as scribes were from the printing press, then our sense of the efficacy of markets is based on a different definition of the 'market'. The market, if we look at the GS contretemps as a harbinger, is not based on assets or things but on code. And then our models for judgement, discretion, success and failure. In a situation with such unprecedented complexity and so few truly knowledgeable players the only sensible strategy should be to keep the basic truths at a laser-like clarity and the courage to keeping asking idiot questions like 'if there's nothing (no thing) attached to the investment, is there an investment?'

One Positive?

originally posted FRIDAY, MARCH 6, 2009

one positive?

Woody Allen had a bit in his stand up act that went something like...'I'd like to tell you something positive...but I can't. Would you take two negatives'.

Two negatives would be good news in the current environment. There is no adequate description of the fear and pain that is rolling in waves through our society. Today's NYT business sections had only bad news. We are looking at the world's largest financial institution--Citi--yesterday becoming a penny stock. GE--mainstay of the DJIA sunk into the 5s this week. And no one know anything. The finest, most powerful investment banker in the world was left bereft of any effective ideas. Our new Treasury Sec seems like a fine young bureaucrat. A bank guy through and through, when what we need is a visionary with executional experience and skills. The teams working on the solution !@#$?? are filled with academics, toadies, theorists and patronage. One observation: 

THERE ARE NO PRACTIONERS. NONE. 

That's important because the bills and the checks are being written by people who have never seen the true workings of a market. They have never lived the market. They don't know what it is.

And without that basic understanding, we--the country--slides deeper into the second world. Debt, diminishing educational standards, a growing population of the unskilled and unemployed.

With most of contemporary finance focused exclusively on increasing their personal wealth, it is hard to conceive of a working financier who has the intellectual horsepower and knowledge of the markets taking the time to bring sense to this downward spiral.

 I have an idea: Michael Milken. He saw the future several times. He's taken straw and turned it to gold--launching Fedex, Continental, and others. He has the horsepower and the respect of the markets.

I worked with him in the past--and I can say There is no one else.

I've not read that anyone in the administration has asked him.

World Class B2B

The Cases For World-Class Marketing

The question arises frequently with companies that have primarily or exclusively B2B customers: ‘Why spend enormous amounts of money on marketing when our customers are already identified and already know who we are?’

Much of the accepted wisdom is that since the subject matter in B2B is the hard parts and high-end intellect of products and services aimed at the corporate audience, they don’t need to be ‘marketed’. Messaging is often amateurish and writing and design standards are not in keeping with the levels of excellence applied to R&D or investor relations. The marketing function is often under resourced and more service than strategic than it could or should be.

Many B2B marketers believe that developing a world-class brand will be expensive. But most of the time, these companies already are spending significant sums on trade shows, vertical ads, collateral and consultants and can benefit from strategic review and analysis to optimize these existing investments.

We disagree. With all the accepted wisdom.

Complex. Cynical. Compelling.

We have built an industry-leading practice at developing world-class brand and marketing solutions for companies with complex value propositions and hard to reach, cynical audiences by understanding that these audiences are more demanding and tougher to sell to than any consumer who’s considering which soft drink, running shoe or sofa to buy. The typical audiences for B2B include the investment community—analysts, fund mangers and high net-worth individuals, upstream corporate managers—CEO, CFO and board directors and functional management. Audiences also include the myriad influencers of typical large corporate purchases and increasingly include procurement and purchasing managers who apply entirely different criteria to the issue. Regulators and government are part of the equation. And, one should never forget that part of every corporate marketing investment should be retaining, attracting and motivating the workforce. These audiences have even less time and have a much higher level of knowledge and understanding which place greater threshold of excellence on the brand and marketing efforts, for they have no time for missteps in the strategy or naiveté in the copy.

These factors make it essential that communications programs compel the audience to act.

It’s More Fun Than Soda

B2B branding and marketing is unique—clients have more complicated messages and have multi-layered value propositions which must be translated to a memorable, competitive set of words that work in an annual report, at a trade show, in a sales meeting or in an elevator. This work supports large corporate purchases made by the leaders of industry. The stakes are higher. The risks, greater. And that’s why it requires the best.

World-class B2B branding clarifies complex brand portfolios making it easier for the sales force to cross sell and easier for analysts to perceive value in the corporate holdings. Great B2B generates returns by giving workers pride in the company and increasing productivity and loyalty. We pride ourselves on creating solutions, which add-value to the enterprise by finding synergies in marketing spending across divisions and regions, by creating common vocabularies, which multiply the effect on any single pitch meeting, ad or sales pitch.

Most importantly, branding and marketing enable management to control the dialogue about their company and to exert more influence about their industry debate.  A world-class brand immediately sends an immediate signal of leadership and focus to all your relevant audiences and competitors.

A Message From Our Sponsor

ConstellationNY helps companies become more relevant and responsive to their markets. We create marketing solutions, which place our clients in leadership positions in their industries. Our world-class solutions start with a deep understanding of where management wants to be in their business and what issues are shaping their industry. We create focused and competitive value propositions for complex brand/product offerings. We create all the expressions of these strategies: website design and content, advertising, collateral, event management, sales strategies and e-mail marketing, customer segmentation and direct marketing.

No matter how specialized a market or product is, the audience’s perceptions of quality, innovation, and value is shaped by the brands they encounter throughout the world. So, even if your brand competes in an extremely vertical market, its website design and content will be judged by the very best of website design—so making B2B messages smartly designed, well written and intuitive isn’t vanity.

It’s good business.

its later than we think

THE LATE SHIFT ISN'T WORKING ANYMORE

The word count about Leno, O'Brien and Letterman is off the charts. Interesting to see how each is taking his spot in the social/cultural drama of the moment. Leno--dispised corporate hack, O'Brien--wronged in defense of his art, Letterman--smug and vindicated.

One fact is that everyone of these guys has made enormous sums--read >$100M per--over the past few years alone. All three have had greatness. All three have not been great lately.

NBC surely made poor decisions. And almost all made because they view the talent as a six-sigma measured commodity. They view the talent as something to manipulate and understanding part of it will fail, they plan to mop up later. The corporate view is likely that the time slot is what's important, not the personality. Not the show. Because curiously, there has been no visible tinkering with the material on either Leno or the Tonight Show since they started their nosedives. The shows--all of them, including Letterman, stink. They are weary, bored and contemptuous of their audience.

And viewers have responded in kind. Comedy is only part business--it only exists at any level of quality, if it springs from something inside that needs to get out. Whether it's Prior, Klein, Rodney or Rock they have something to say that's independent of their payday. It's hard to take Conan's aggrieved sthtick too seriously when you seen the half-hearted material he's been delivering for 3 months. It's impossible to believe that any of these guys at this net-worth have anything to get out or anything to prove.

It's impossible to believe that much comedy is ever coming out of the infrastructure ofmanagers, lawyers, agents, publicists and posters that appears after the first successful set. But that another post.