A little mojo goes a long way. Too much is often a bad thing. The Wall St. Journal this week is running three front-page articles on the “fatal” run at Bear Stearns.
Growing up as I did with a father who worked for Goldman Sachs, I and many others always viewed Bear as the naughty kid on the block, compared to Morgan or Goldman. Its free-wheeling environment encouraged playing it fast and loose. That was the culture. It’s good to be differentiated. But when does reaching for the edge, fall overboard?
Did Bear Stearns reach too far, or get caught up in a sea of uncontrollable external influences?
It will be a long time, and many dissertations later before we can achieve any honest perspective on Bear’s downfall. And most likely, it’s a combination of both. One thing is for certain, with the intervention of the Federal Reserve Board, things are not likely to ever be quite the same on Wall Street.
As we continue to sort things out, what is worth paying attention to in our own world that we can take away from the Bear situation?
A couple of things immediately come to mind.
Despite the Wall St. Journal’s stance, the story started long before last summer. And obviously, there were too few checks and balances. There was little common sense about the sub-prime lending market.
Since these observations are old news, what’s my point?
It’s this: people in NYC in the financial capital are too often sucked into a world that defies reality. A world that is insulated from the daily reality where most Americans live. It’s not just Bear Stearns leaders that are susceptible to this insularity. It happens all the time when leaders become out of touch. There is a happy balance between being focused and being insular.
A famous economist I know takes three trips a year in a Greyhound bus. Yes, a greyhound bus! Not first class on American Airlines. Not on the corporate jet. On a Greyhound bus. He talks to people. People who don’t know him from Adam. He doesn’t hide from people-which so many leaders do, once they get to the top. Even better, he listens to what they have to say.
How can you make effective decisions about anything if you live in an ivory tower? You can’t. If you live in a gated community and never travel out of your comfort zone, you lose your touch and your perspective.
I’m sitting in my office in Dallas, Texas, a long way from the sub-prime chaos. Three years ago when I borrowed home-equity money to finance renovations, I saw first-hand how fast and loose the lenders offering loans. My bones told me, something’s wrong here, and I’ll bet things are not going to turn out well.
How do you feel about Bear Stearns? How do you feel about the sub-prime lending? What do you prevent yourself from becoming insular?