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House of Cards

Friday, February 13, 2009

Watching this week's cruel and unusual entertainment as the House of Commons' Treasury Select Committee interrogated society's outcasts (otherwise known as Bankers) reminded me of what I used to be told by the Bank of England guy who looked after Firstdirect. It's a house of cards old boy, he'd say , as he handed me a gin and tonic : if something dislodges one of the cards it all comes down.

He was talking about the UK banking system but the words today apply directly to the inter-connected global financial system. The old style regulators used to see their job as assessing and avoiding systemic risk ie anything that could dislodge one of the cards. It was an intense focus by highly experienced people and they didn't interfere in anything else. It worked.

It didn't work in 2008 , hence the credit crunch . It didn't work for two reasons: firstly the financial system is global now with global systemic risk and regulation remains national. The Prime Minister is absolutely right to point a finger at that. Secondly regulation has become unfocused. There are more banking regulators in the world now than ever before - probably a 100 times as many as in the 80s. There are more regulations - volumes and volumes of them. Vast fortunes are spent on computer systems to assess risk in all aspects of an organisations' business. Regulation is intrusive, unfocused and diffuse and judging by the results - useless. (I know that's unfair!) .Nobody talked in 2008 about Houses of Cards over gin and tonics. If they had done they wouldn't have missed the big systemic risks that led to a relatively containable crisis in US sub prime almost destroying us all. The biggest card that fell was Lehmans , at the centre of the trillion dollar trade in CDOs. Destruction was unstoppable after that -of all the banks to let fail......

Yes bankers were greedy, yes they made mistakes - some really stupid mistakes, yes the bonus culture became obscene, but let's not let regulators off the hook!

And while we are are at it a ritual flogging as well please for rating agencies who rated everything triple A, economists who built the risk models that turned out to be nonsense, and fund managers who urged the banks on to faster and faster expansion. And don't get me started on the whole risk management industry - it didn't exist in the 80s and not one ot the tens of thousands of people employed in it now predicted the systemic risk that would cause wholesale money markets to stop working and thus bring down the more over extended banks.

If those banks hadn't have been rescued by the way the rest of the "well- managed" banks would have toppled soon afterwards. That's what happens with a House of Cards.

Rant over, back to garlik!

A little bit of sunshine

Friday, December 5, 2008

There is no doubt that the economic news all over the world is filled with doom and gloom right now. No one knows the length and depth of the recession but at least governments worldwide are taking what seems to me to be sensible action by protecting the financial system (sine qua nihil) and providing fiscal and monetary support to the economy. In fact they are providing so much support I wouldn't be surprised by a faster recovery than most are anticipating with real dangers of a bit of a boom and bust cycle creeping back in. But in the short term I sense there is a lot worse to come before it starts to improve. That doesn't mean there aren't oppotunities around though and it's important to stay positive and keep a little bit of sunshine in your life.

I escaped from the doom for a bit by spending a couple of weeks in the Seychelles - it's hard to be gloomy there and since I got back I've been really pleased by a couple of things which have kept me feeling extremely sunny.

. Firstly Garlik (of which I'm Chairman) has won the prestigious BT award for innovation- an extract from the press release below will show you why I'm so pleased with that: (the picture shows CEO Tom Ilube and Ops director Paula Evans with the awards)

05 December 2008: Recognising innovation, professionalism and best practice, the British Computer Society (BCS) IT Industry Awards
were announced last night at the Grosvenor House Hotel.
The much coveted BT Flagship Award for Innovation was collected by Garlik Ltd for their DataPatrol, Innovation for Garlik.com
project. The project also collected the Web-based Technology Project award. DataPatrol, developed in response to the evolving
world of identity theft, is the world's first semantic technology platform that aims to give consumers power over their privacy
and identity online.
Tom Ilube, CEO of Garlik commented: "We are thrilled to have been recognised and awarded two such important and prestigious awards
for our work. As we expand our business in 2009 both in Europe and in the USA and evolve the products we offer, this award
represents an especially significant honour for us."

I was also involved in the launch of Federation100 in November - this is a collection of start ups and small and medium businesses who are supported in a group with intensive coaching from Anurag Gupta, Mynoo Blackbyrn and a little bit of help from me with the aim of skyrocketing their performance, even in a recession. The membership is growing rapidly (as you can see from the photos) to our initial target of 15 companies and I think those involved in the first sessions could immediately appreciate the power of what was on offer. I'm really pleased this has got going and I have great hopes that it can help make the UK a great environment for entrepreneurs and innovators.

Mike and Anurag

Foundation100 - current members

Federation100

Thursday, October 9, 2008

This is a different blog post from normal. I wanted to let people who read my web site know about something I am up to

I and my collaborators have created an organisation called Federation100 . We are at the moment looking to work with companies in Europe each
with a big vision for their business , a vision that not only delivers wealth but also makes a remarkable difference in the world. I meet many such people who ask my advice - either right at the start of their businesses or after a few years when they have reached an impasse - they have got so far but can't see how to get the breakthroughs they need to take the next steps toward their vision .

What's missing , that would make a huge difference in my opinion is access to regular, affordable world class, results oriented coaching and in some cases facilitation of the provision of seed or growth finance from investors who share their vision. That's what we are trying to put in place with Federation100 - called that by the way because we intend work with the businesses in groups , groups where individual companies can spark off and support each other - a federation if you like. Our ambition for it, in a few years time, is to have a web site showcasing the 100 companies we will have worked with by then -each being a stunning success story.

It's an initiative bang in line with my intention of inspiring innovation and entrepreneurship and it came about because two people read my book and took an idea which was working in Canada - shaped it and stretched it and turned it into something I could get behind.

I'm working with Mynoo Blackbyrn who is the driving force behind this initiative . I've known Mynoo for many years as a serial entrepreneur and leadership coach.

We are working together with Anarag Gupta. Anarag has been running an organisation called the difference engine in Vancouver. The difference engine is a group of 16 businesses who get together regularly to be coached by Anarag and share their insights with each other. Here is what Anarag has to say about it :

We design and implement initiatives that produce previously unseen levels of performance and results. We are currently working in the areas of business, education, wellness and entertainment. Every project we design, or step into, generates exceptional exponential results, while at the same time causing transformation in the community and the world - hence everything becomes a difference engine.

Here is what one client had to say about Anurag :

What can I say: Every bit of advice and coaching Anurag has ever given me, be it personal or business, has made an immediate and lasting difference in my life. I can look back on so many instances where his support and assistance enabled me to achieve new levels of performance in my career, and new levels of connectedness and success in my relationships, with often immediate results. He is a gift and an asset to anyone willing and able to work with him and The Difference Engine. I highly recommend anyone who has ever had a dream for their business that looks unreachable get in contact with him right away. March 10, 2008
Jay Giraud (Salesperson / Sales Manager at Carter Honda / Carter Motorsports) worked with Anurag at The Difference Engine.

We can quote many success stories from Anurag's work - here’s just two : Lululemon (a yoga apparel company) which grew from an idea to be listed on Nasdaq for 3 billion dollars, and at the other end of the scale, Panther, a construction company which in the last 7 months has grown its revenues from from $7 million to $18 million despite the recession in that industry.

Anurag's philosophy is very similar to that I've outlined in the chapters in my book on Leadership, Brand, Culture and Hot Teams and Anarag will now be spending time working in Europe for Federation100. Mynoo and I will be adding workshops and practical help on the material covered in the other parts of my book - that is: idea shaping and stretching, funding and the planning and smart risk processes which lets you approach a big vision a doable step at a time. We have run many such workshops in the past and I think the most valuable thing people get from it is a clarity on what they are up to, on what really matters now and a clearing of the blind spots which will prevent their success.

There is so much more to say and show and those of you coming to the business growth workshop on 25th November can grab me or Mynoo then to find out more. Anyone else who is interested please contact Mynoo by email. We will only be working with 15 companies and only those we are able to believe in.

All I can say for now is that we have described the idea to five companies so far to try and get some design feedback and somewhat to our surprise four of them have asked if they can apply to join Federation100.

Exclusive: Bill Gates agrees with Mike Harris

Monday, October 6, 2008

I spent last week talking about my book to over 1000 entrepreneurs in Bury (nr Manchester), Milton Keynes, London and Newport (S Wales) .

As with the last event in London in July I was bowled over by the enthusiasm and passion people can bring to creating businesses and turning ideas into money.

People were keen to hear my view on the economic crisis. I don't have any special insight but for what it's worth here is what I told them:

1.This is the seventh economic crisis I can remember since I started work in the city in 1970

2.The prediction of the end of the world and/or the end of capitalism was common to all of them

3.What was said in the eye of the storm (like now!) almost always turned out to be wrong and the crisis and its aftermath were only really understood long after the event

4.The one that scared me most was in the early 70s when the oil crisis (prices quadrupling over night) , combined with a banking crisis brought on by the collapse of commercial property values, coincided with a miners' strike, power cuts and a three day
week, together with:rampant inflation and falling stock markets

5.Banks always get into trouble in recessions - it's just that this time global digital news and blog comment , 24 by 7, has caused panic and a liquidity crisis of vast proportions at mind boggling speed.Should the liquidity crisis cause a systemic failure in the financial system it would be much worse than a depression; the modern economy depends on global banking and global payments much more then it did even 10 years ago let alone 70 years ago;if the big banks fail everything fails

6.We are nowhere near there yet and the authorities would have to be outrageously inept to get us there from here; in fact given the scale, speed and unprecedented nature of the crisis I think they have done rather well so far and I expect there is much more to come; the banks will be secured.

7.People should nevertheless prepare for a significant downturn and a reduction in revenues over the next 18 months; it feels like a nasty recession comimg on , but not a decade long depression or worse

8. Recessions create great opportunities for innovation. It's like a forest fire - some trees are destroyed , but the ones left have more room to grow and there is room for many new shoots of growth. If you think about it Silicon Valley emerged in the great
Amercian depression in the 1930s, The PC industry (Microsoft and Apple), the enterprise software industry (Oracle, SAP, Computer Associates) and Biotech all emerged in the 1970s recession and the dot com world came out the recssion in the early 90s.

9. Take heart from the fact that two of the most astute investors of modern times , Warren Buffet and Anthony Bolton both see buying opportunities in today's market and are putting their own money where their mouths are.

To cap it all here is what Bill Gates just said (quoted in numerous news sources)

"It's a very interesting crisis," said the founder of Microsoft, adding that the effect of the collapse of the subprime market
needs "requires "some type of correction… but fundamentally ... companies' willingness to invest, right now we haven't seen a huge
disruption in that."
Responding to concerns about the US$700 billion bailout plan which US President George W. Bush signed last week, Gates surmised
that "it doesn't look like fixing these problems is going to derail the economy in some dramatic way."
Gates stressed that "the amount of innovation taking place, the amount of investment is actually greater today than ever," and
said he believed this would be the answer to the current crisis.

Buffet, Bolton, Gates and Harris might all be wrong of course! I suspect we shall see over the next couple of weeks.

By the way there is another opportunity to hear me speak on innovation (and economic crises!) at the Foundation Forum on November 5th. Details follow:

The Foundation Forum: Making Big Things Happen
Wednesday November 5th 6:30 -8:30
The Foundation is a Strategic innovation consultancy consisiting of 15 people, with backgrounds in blue-chip consultancies,
creative agencies, business, banking and ventures.
We hold the Foundation Forums every 3 months as an opportunity to bring people together to discuss a topical subject and listen
to/ be provoked by interesting speakers.

Mike Harris will share with us his ideas for how to make big things happen (developed for his recent book ‘Find Your Lightbulb’)
and will invite comment and ideas from the floor.
The event is being held at The Art’s Club, 40 Dover Street in Mayfair, near the Ritz and Green Park tube station. We will be
having drinks beforehand from 6:30pm, starting the discussion at 7pm, and then more drinks in the convivial Arts Club atmosphere
from 8:15 to 9-ish.
There is no charge for attending but please Sonia know if you are planning to attend by emailing sstuart@the-foundation.com as
soon as possible.

Nick CrossPartnerThe Foundation

You don't know what you've got till it's gone

Sunday, September 21, 2008

As the world flirted with financial meltdown last week a song popped into my head. For once it wasn't a Dylan song although he did make a cover version. It was a Joni Mitchell song from 1970 , called Big Yellow Taxi. She wrote it in Hawaii where she had seen a newly constructed parking lot diminish the iconic view of the distant green mountains. Hence the lyrics:

Don't it always seem to go That you don't know what you've got Till it's gone They paved paradise And put up a parking lot:

What struck me when I first heard that song and still strikes me now is the universal truth of the sentiment:

Don't it always seem to go That you don't know what you've got Till it's gone

The relevance to the credit crunch may not be immediately apparent but stay with me and I'll try and make the link.

Whatever diagnoses of the causes of the great panic of 2008 eventually emerge when we have some perspective, the whole series of events must raise some questions about bank regulation.

The primary purpose of bank regulation is to avoid systemic risk - that is risks to the entire financial system. Exactly the sort of risks we have been living through. It is clear that regulators neither anticipated nor took action to avoid such risks. Until eventually the US government came to the rescue (I hope!) with a massive bail out - about time guys but better late than never!

I'm not intending to criticise regulators at all but instead just to make one observation. I thought Banking regulation in the UK was fantastic when it was the responsibility of the Bank of England.
(It was moved to the FSA in 1997 by Gordon Brown, and the then Governor of the Bank of England Eddie George came close to resigning as a result).

It used to be based on cosy fireside chats between senior Bank of England officials and Bank CEOs with many a nod and a wink.

What worked was the Bank of England official knew both banking and the institution he or she was supervising backwards and those chats stopped being cosy the second the Bank CEO couldn't explain exactly what was going on at the Bank or worse still wasn't totally open and honest about everything. There was a sense of shared responsibility for the well being of both the institution and the banking system. If there was trouble they were both in trouble.

The FSA system was far more professional and apparently rigourous but the context of the reviews shifted from "we are both in this together and these meeting are really useful to both of us" to a box ticking type of risk review that could easily miss the big picture and which certainly wasn't welcomed by the Bank as something valuable.

So there you go - I don't know whether the old Bank of England regulatory approach would have shielded British banks from a global crisis which was born in sub prime America but I bet it would have dealt with the crisis better- as of everything else in the world it is perhaps true of bank regulation :

That you don't know what you've got Till it's gone

The Myth of Risk Management

Thursday, September 4, 2008

I've been reading this book and it certainly chimes with my own views of risk ie that:

You can't avoid risks and it's almost impossible to make an intiuitive assessment of any risk without some sort of structured process which opens your eyes to the real issues you need to take care of

the best risk management strategy is for accountable people to take responsibility , use their judgment and confront risk with eyes open rather than seeking to avoid risks through health and safety style risk assessments or box ticking risk management and governance procedures

I have long thought that the modern corporate culture of govenance and risk management by box ticking often supported by mathematical modelling of amazing complexity takes up so much time and is so mind bogglingly boring that accountable executives just switch off and stop thinking. Somebody else is doing the thinking for them. Hence the credit crunch perhaps.

Cairns generalises this view of mine - any risk management strategy which isn't about accountable people keeping their eyes open and confronting risks can make things worse by reducing people's perception of risk (thus provoking more reckless behaviour or causing people to stop using their judgment) or by reducing people's ability to manage risks because they have been too protected .

Some examples:

In terms of risk perception: people are more worried about plane crashes than car crashes or heart disease : yet you would have to fly every day for 26000 years to die in a crash. You would have had 20 car crashes by then and died 90 times from a heart attack.

In terms of more reckless behaviour: cyclists are more at risk when wearing helmets because their own riding is more dangerous and motorists are less careful around them

In terms of stopping thinking: 25% of people will need criminal record checks under new child protection legislation; Cairns argues this will make children less safe because we will all think anybody working with our children will be safe and we won't keep our eyes open and stay alert.

In terms of reducing people's ability to manage risk: children who only play on cushioned playground areas are more likely to get injured when outdoors than those who play in apparently more dangerous areas because the latter have learned to recognise and cope with numerous unavoidable risks.

In business you can't avoid risk. It's a key leadership accountability to understand the real risks you are taking and make sure they are smart risks. It's a key leadership accountability to keep your eyes open and confront the reality of your current situation - balancing on the edge of reason.

It's a good thing small businesses can't afford the elaborate risk managment and governance processes that big businesses use - they are expensive and positively dangerous!

Strange things happen.....

Wednesday, August 27, 2008

...,when you get committed to something and make a big noise about it!

I said that one of my intentions in writing the book was to inspire innovation and entrepreneurship in the UK such that it became the envy of the world . A big game and one in which any one individual can only make a small difference.

But big games often attract others who are playing the same game or want to join yours.

So without me really doing anything about it I find myself going on tour for a week's worth of seminars for entrepreneurs. I did one of these in London in July and it worked really well and I'm repeating that in Edinburgh on 29th September.

http://www.triumphantevents.com/events?access=edinb-mh

Following that I'm teaming up with Roger Hamilton to run four seminars across the country in the next four days. Roger is a significant entrepreneur in his own right and has written a book about different styles of wealth creation which I found very insightful. The basic thesis is very similar to mine - you can't do it alone , you need to create a hot team. What I found particularly interesting was Roger's analysis of what sort of team different types of leaders need to build and what contribution they themselves need to make to their teams.

http://www.triumphantevents.com/events?access=de-mhrh

Finally Mynoo Blackbyrn ( http://www.findyourlightbulb.com/mike-harris/mynoo.html) and I are teaming up to run a one day Business Growth Workshop on 25th November. The background to this is that I have been approached to be part of a television program for entrepreneurs where I would try to transfer my approach to building businesses to entrepreneurs who are 'on the up and up'.

The 25th November event is a 1day pilot .

http://www.triumphantevents.com/events?access=mh-bgw

All of this without any conscious effort on my part . Lots of enthusiasm for the game but nothing else. It all happened because Mynoo and Daniel Priestley of Triumphant Events got excited at the prospect of leveraging the exercises in the book into a powerful support structure for would be entrepreneurs (business and social).

Never underestimate the power of enthusiasm and commitment!