The Goldman Sachs Civil Suit

I usually don't like to get too far into disecting the news on this blog, but the decision to file a civil suit against Goldman Sachs for fraud is very unique. The firm brokered tons of deals where they sold complex CDOs filled with dangerous mortgages that would eventually default. What makes all this so incredible is that Goldman could create and sell these packages for huge money and have them all insured through AIG to hedge any potential risk. We know how that worked out for AIG. It's amazing how such a small percentage of your total business can take-down an entire company when things turn sour. Sure, Goldman also hurt for a few quarters in the heart of the meltdown but they have turned the corner quite easily since. AIG, on the other hand, needed a ton of money from the U.S. Government and still may not make it.

So, in the heat of the growing CDO/housing bubble, a few investors started investigating the possibility of shorting these securities and the firm allowed that too! They were essentially on both sides of a deal in which they knew at least one particpant was going to lose a lot of money. Being involved in the sale and the shorting of the same asset means one of your clients is going to make money and the other is going to get killed. It's a zero sum game. Goldman was so oblivious (or didn't care) in the beginning that they let the shorters cherry-pick the CDO's they wanted. These guys went after the most toxic of the group and made BILLIONS.

But, is Goldman really at fault here? There are definately some moral obligations that were not lived-up to in this scenario, but can you place the entire blame on the firm? I don't think so. Times were too good and large investors were willing to buy anything. You have to do some research and understand what you are buying. As a small-scale stock picker, I know how much due-diligence I do before spending any of my money on a company. I am sure the salesman were slick and the prospectus was glossy, yet I can't help but think there has to be some blame placed on the money managers looking to show-off big returns.

While it's not great to think about the pools of money the shorters made off betting against the American Dream, you have to applaud their intelligence and rebelliousness. These investors went against everything they read and heard on a daily basis and took the time to understand the asset and what comprised it. They saw a bubble and did not wait for it to pop.

The civil lawsuit could be a big turn. So many people are scrutinizing whether any sort of sustainable regulation was put in place since the financial crisis. The simple answer is probably not. Until the firms have to be completely transparant on every deal, especially complex combinations of debt, there will never be complete oversight. Now, at least, there is the possibility of financial penalties for being too good of a salesman (be it a deceptive saleman). The lawsuit may open the floodgates to many other civil suits. In the end, though, it will be business as usual for financial firms so large that they constantly have to come up with new forms of innovation to keep the revenue train moving forward.

Transition

I apologize to everyone for taking so long between posts. The last few weeks have been a time of transition for me as I moved to another position at my company. It occured to me there are a lot of business lessons to take away from periods of movement and the art of learning a new position. Here are the essentials:

Humble yourself. An ego has no place in a new job. You are making new friends and business contacts that need to respect you and your ability to function as part of a team. It takes time to earn the trust of those around you. Don't take that message as saying not to speak up and implement your ideas to make a process or product better. Simply use an extra amount of tact so you don't come off as a bull in someone else's china shop

Prepare to work on nights and weekends. You will naturally be slower than your predecessor at the new job, so understand that it will take extra time to finish a task. You need to use this time to prepare resources and study processes that will make you more efficient. Often, this will also be the time when you find problems with old systems and begin thinking of ways to optimize.

Ask questions. There is a certain understanding that goes along with being a beginner. Think of the breaks you allow a novice to a card game. The company hired or promoted you because they want to see you succeed. Understanding this basic thought should set your mind free to ask questions and seek help in excelling.

Don't loose your cool over a mistake. They are just going to happen and your focus needs to shift to correcting with minimal damage. It goes back to a general business principle: be proactive and not reactive. If there is a task you don't fully understand and no one around to ask than simply take steps to clot any damage that could occur. Your co-workers will understand, just be honest don't try to cover-up while digging yourself into a deeper hole.

Work as hard as you can. Most evaluators of future talent make a decision on the potential of new hires within weeks of starting. It is important to make that initial impression very positive and ensure that you are on the minds of the career-makers. It is certainly important to always work hard, but you first paycheck cycle could make a tremendous impact on your future.
Keep the ball moving forward and always put yourself in positions to succeed.

Be Productive

A lot of talk is devoted to the best way to be efficient and organized throughout the day. There are highly-paid professionals making money purely from teaching people to prioritize tasks and stop wasting portions of their time. For me, being productive is a personal idea and must be tailored to an individuals own ways of thinking and problem solving. With that being said, there are certain patterns used by successful people that must be examined and possibly integrated into your daily routine.

INC. profiled a few prosperous executives and entrepreneurs to see their strategies for executing the 'to-do list.' Let's look at a few highlights:

Jordan Zimmerman insists on daily phone calls. He has direct access to the heads of client companies and an understanding that they will take each other's calls to discuss strategy and progress in succinct conversations. Zimmerman also doesn't sleep and is routinely up at 3 AM to workout before starting his day (which he claims gives him energy for the day).

Kevin P. Ryan spends a great deal of time involved in HR for his company. He insists on doing a large amount of the hiring as he feels that the right people make his job that much easier. Ryan is in constant contact with his top executives and those identified as 'up-and-comers' both inside and outside the company in order to feel at-ease with delegation.

Barbara Corcoran makes her 'to-do list' for the next day before she takes of for the night using a rating system based on the importance of the task. This way, she hits the ground on the hard stuff in the morning and the day runs smoother. Corcoran also has a list of follow-ups assigned to people after each meeting to make sure that maximum time is spent executing as opposed confusion in responsibility.

Seth Priebatsch is most efficient during off-hours from work. He finds that large problems are much easier to solve when the office is empty and there is time to really think. Using the nights and weekends allow for his time to run smoothly when employees are demanding his attention.

Scott Lang always keeps large blocks of his day unscheduled. He likes to keep a cap at 50%, though admits that number can sometimes slip to 80%, to solve problems that come up during the day or be open for a last-minute client meeting or call.

While these are only a few examples, the major themes include the importance of exercise, keeping meetings to a minimum, and solving problems through unscheduled or open time blocks. Your productivity will always be based on the optimum use of your thoughts. Keep an open-mind and be on the lookout for ways to increase your efficiency but, remember, the goal is to always keep the ball moving forward any way you see fit.

Negotiation

This is a great example of negotiating from a Hollywood Mogul to a future Hollywood Mogul. Barry Diller, then a young executive at ABC on his way to running a few studios and, more recently, IAC, was approaching Lew Wasserman, head of MCA/Universal:

"I was purchasing films for ABC from Universal, and I went to his office, and I asked him - I said, given that we are buying sixty-four units at ,$600,000 each, couldn't you cut one little unit off the sixty-four? Two beats. He stared. He said, 'No.' Nothing more. Just, no. Silence. The stare. And I folded like the cheapest tent. But as I got up to go, dejected, knowing the fool that I was, he walked me out and in that very quiet voice of his he said, 'Next time you try this, be prepared to call it off if you don't get what you want. Because, otherwise, you never will.' And the door closed behind him."

-From When Hollywood Had A King by Connie Bruce.

How To Get Rich

How do you lay the foundation for getting rich? Its a process we all must have the patience and passion to attain.

Mark Cuban understands how to get rich. His success has come from the ability to see opportunity and take the necessary steps to accomplish his goals. This is certainly an over-simplification, but understand that is a macro-approach to the situation. Gaining real wealth means expending all the resources at your disposal and committing the house when the right shot comes around. In youth, the stakes are high but manageable. I don't want this blog to always seem like we have nothing to lose because of our age, but it should drive home the point that now holds fewer consequences.

Even if the right opportunity is not in front of you at this moment, the preparation will make all the difference. Mark has always been very specific about the role discipline must play starting out. There are no shortcuts to real wealth and no gimmicks that will actually make this process any easier than the sweat and stress involved. The discipline takes on a few dimensions. The first is the discipline of saving money and shopping smart. No matter your salary, conserve as much money as possible, not for long term retirement, but in order to have the cash available to make a significant play at the right opportunity. Cash is king in business.

The next facet of discipline involves the patience it takes to wait for an unstable market to attack. Get the best deal possible and be ready for a bust at any time. Learning the business you want to pursue should include learning the historical causes of booms and busts. You must commit to understanding the data and the ramifications from numbers that seem inflated or overexposed. It is during these times whe you use that money you have been conserving. See the opportunity and seize it.

Talent Development

If you look carefully at the former employers of many of the most successful entrepreneurs and executives in the world, you will start to notice a pattern. Certain companies have an uncanny ability to develop talent. This doesn't happen by chance, but because they take the time to find potential and nurture growth. GE, Proctor & Gamble, Coca-Cola, and Microsoft are known to be some of the best and they invest a great deal of money and resources to keep it that way.

In my business, the William Morris Agency mailroom was the ultimate place to start a career. Young graduates would take substantial pay cuts (and check their pride) in order to deliver mail for the talent agency and it's stable of stars. Michael Eisner, David Geffen, and Barry Diller are just a few of the media industry legends willing to work their way from the bottom-up. While there are now more agencies to choose from, the mentality is still the same. Work the long hours, accept the low pay, and learn all you can. If you don't work out, there are 100 other kids willing to take your spot. This program is a little more extreme than the talent development programs at your typical company, but there is something to be said for succeeding in an environment like this.


I started thinking about talent development while reading this article from Bloomberg Business Week about the next generation of tech companies being started and/or funded by former Google employees. The conglomerate has produced an unbelievable number of start up founders that are revolutionizing all areas of technology. Those who are not starting the companies are investing and helping in early-stage development. It should be said that the ex-Gogglers have more money than your typical young, former employee, but it's more than just the money that is creating all this success and wealth. It's about the network and experience that comes with working at Google. These entrepreneurs and investors have direct involvement in Justin.tv, mint.com, Foursquare, Twitter, Facebook, Tapulous, Y Combinator, and bit.ly to name a few. The network is kept alive through events organized for the purpose of sharing information and ideas.


So where is the lesson here? Really it is two-fold. First, do your research on the companies who will identify your talent and open doors through development for the future. Sometimes there may be a pay cut from other opportunities, but understand it as an investment in your future. The second lesson is the importance of recognizing people with whom a relationship will be mutually beneficial and fighting to keep that connection alive.

Execute

Consultants tend to be good consultants because they have the ability to analyze information and suggest solutions. Analysis is an important part of business but has nothing to do with how successful your company will be. The single determining factor in achieving your goals is the ability to implement. In other words, make things happen.

Let's back-up for a second. I am not saying that having the numbers and understanding your business won't pay dividends in the long run, I am simply saying that any good executive or entrepreneur has the the ability to 'Just do it'. The importance of this ability for entrepreneurs is made expertly by Mark Suster.

What does it mean to make things happen? It means to close the sale, convince suppliers to discount prices, hire qualified people, fire under performing employees, and constantly advance forward. In short, pay the bills and expand.

In my business, I am tasked everyday with delivering on near impossible tasks no matter how mundane without excuses. There is no room for being passive and you better have a good reason for not executing. It is part of our internal training. Our company is so successful because it is filled with self-starters and doers. This is not to say that everyone must operate at this level or that it's the only way commerce functions, but it could be the difference between your start up becoming a profitable business or your department meeting it's yearly targets.

Be aggressive, execute, and make things happen.

Do Your Homework, Get The Job

It had been a while since I went through an interview but, sure enough, walking into the meeting with who will be my new boss brought back the same nervous energy I had when first trying to get into the company. So how do you calm these nerves and get the job every time? Simple, do your homework.

It's important to understand that, first and foremost, an interview is a sales meeting. The person asking the questions has a need and you must convince them you are the best candidate to satisfy that need. As you would in any sales meeting, you must come prepared. The first step is to understand the company and what they do. Use the internet to research every aspect of their business and how they are innovating and moving towards the future. Familiarize yourself with the history and the leaders who have shaped the company. Also, understand the competition and where their strengths and weaknesses lie. I can tell you that most of the candidates will not have this information and will be at severe disadvantage to those who do.

Armed with this research, you can have an extremely educated conversation about the job and how you would fit into the company's vision for the future. Do not propose any 'revolutionary ideas' or changes to the business. This comes with time in the position.

Dig up some information on who will be conducting the interview and who your superior would be. LinkedIn and Facebook will be resources to see work history. Try to talk to someone who works at the company and find out the culture at the office. Tailor your pitch to how your strengths would gel in that particular office environment.

If you come prepared with the right information for an interview then it simply becomes a conversation. Be calm and collected. Prove through doing your homework that you have the work ethic to excel in the position.

Carpe Diem

It's decision time.

Every so often, an opportunity comes around and you have decide the path to your life's success. These are fantastic moments. They are moments of introspection, evaluation, and idealization. My moment came this week in the form of an exciting new opportunity at work. It was time to really think.

Comfort, to me, is a scary word. I always link being comfortable with settling and that should not be an option when you are young in your career. This is the time to take risks and experiment. Those risks may be dangerous and come with a lot more work and stress, but that is part of the growth and maturation of getting into business. Like my parents always used to say, "Welcome to the real world." As you get older, you will get used to sleeping less and having less time to sit around and watch TV. If you are eager and ambitious to get a jump start on creating success, there will be side businesses and the constant pursuit of extra knowledge on top of your responsibilities at the stable job. Success is attained through small sacrifices.

The more I thought about the opportunity in front of me, the more excited I got. Being at an age where learning from powerful people still gets my heart racing means any chance to work for someone more polished, more respected, and willing to teach along the way is the ULTIMATE opportunity. Sometimes there is no increase in pay, and maybe even a decrease, but it must be seen as an investment. No business class can teach what someones success can.

Don't lose sight of the endgame. Your career is a marathon and should be the right combination of planning and pure instinct. The last thing you want is to look back at retirement age with a 'what if' in your mind. Carpe Diem.

Drink The Kool-Aid

Drink the Kool-Aid and take your career to new heights.

MEN'S HEALTH had an article this month that hit real close to home. It details the many disadvantages of a cynic, those who blame others for their problems in both their business and personal lives. Constantly complaining and asking questions as to why it never seems to happen for you eliminates motivation and takes time away from what you could be accomplishing to get ahead. It's time to take responsibility for what happens in your career and create the opportunities that will lead to success.

The article quotes Mathew McConaughey, "Cynics love to put their finger on disease before they put it on health. It's the easy way to go. Play the blame game." The problem is that successful people do the opposite. They drink the Kool-Aid and believe they create their own destinies.

Everyone in the business world suffers from cynicism at some point, especially those in the corporate world. I found myself sitting at work several times this week thinking cynical thoughts about my workload and those around me. Sometimes we just need a wake-up call. Think about all you're learning and the connections you're making. Think about being young with the world in your grasp. Think positive. Drink the Kool-Aid.

Mark Cuban's Message To The Young

You can't argue with the man's success. Mark points out that you can't be in too much of a hurry to grow-up and the importance of absorbing all the basic business principles you can. As most of us will find out, you learn more through real world experience than any class can teach.

SUCCESS & MOTIVATION: SCATTERBRAINED AND IN COLLEGE

Learning From A Recession

Survival was the main objective for many companies during the recession that has gripped the global economy for the past 18 months. Businesses got leaner, more reactive, and certainly learned to operate with more efficiency as a matter of necessity rather than want.

Whether your company was in the real estate market or not meant little when the international markets froze, prices tumbled, and a wide-ranging economic disaster struck. It is nothing any of us could have planned for (except for the brilliant hedge fund managers who bet against the bubble and took home 1000% gains for their efforts) but an event that truly separated the good business managers from the great. Those of us lucky enough to be young, still-employed and interested can take away many great business lessons.

Don't become complacent. Your balance sheet is the most important indicator to how you can survive in a climate of free-fall. When markets freeze, the ability to get financing to keep your company moving becomes near impossible. Your reserves are your ticket to survival. Unless you operate the rare 'recession-proof business', you can count on a large percentage of your sales and profits dipping in these tumultuous times. Cash flow will be the key. Always monitor your books and understand how long you could survive if things change.

React quickly. Don't wait until the business is lost to make the necessary cost and staff-cutting decisions to save the company. Make your company as lean as possible without compromising the essentials. Sales, marketing, and research & development must remain strong. While making these changes, always remember the tremendous opportunity a recovery brings. Position the business to reap the rewards of another company's lack of preparation. The only way to dig yourself out of a revenue and profit hole is to make sales!

Diversify your customer base. One account should never be responsible for more than 15% of your revenue, especially in tough times. Always envision the future based on the possibility that you could lose your biggest account. What would happen? Understand the impact a sudden change could have on the books. This is also an opportunity to diversify your employees. Recessions are a great time to recruit talented people who have had a run of bad luck.

The leader must make themselves visible. Your company needs to know who is in charge and that they have a plan to attack the problem . Her or she is their ticket to employment. This kind of decisiveness and leadership has a trickle-down effect in how they deal with customers and market to prospects.

Take the lessons from tough economic times and apply them when times are good. It is the only way to truly ensure your companies' ability to survive and thrive in all climates.