Monthly Bookmarks –
153rd Edition – March 19th, 2023
Our philosophy does not hold that finance is the root of all business. Rather, it complements all other segments of the company.Chouinard, Yvon. Let My People Go Surfing (p. 152)
1. Remember WaMu?
Washington Mutual Bank is still the largest U.S. bank closure at more than $307 billion in assets. Ranking second and third are Silicon Valley Bank (SVB) and Signature Bank, respectively, and both were closed by regulators within two days of each other this month.
The recent banking crisis reminds me of the CAMELS rating system by state and federal regulators. The letters stand for capital adequacy, asset quality, management quality, earnings, liquidity, and sensitivity to market risk. The rating system is scored on a scale of 1 to 5, with 1 being the strongest rating.
In her book, The Lost Bank, Kirsten Grind explains that the OCC downgraded WaMu’s rating from a 2 to a 3, devastating news on the heels of the bank that had seen its market value drop 60% in one year. Of course, we know the rest of the story.
OCC ratings are not available to the public. Would you rather have access to CAMELS ratings or only have access to audited reports by CPA firms? I want access to those CAMELS ratings.
2. Which Day Was it at SVB?
I have no desire to be a judge or pundit with the facts we still don’t know that drove the failure at SVB. That’s the job of regulators and the media.
However, this entry from a 2016 letter to shareholders is both piercing and instructive for any leadership team in its directive to see around blind corners in an uncertain world:
… Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.
To be sure, this kind of decline would happen in extreme slow motion. An established company might harvest Day 2 for decades, but the final result would still come.
I’m interested in the question, how do you fend off Day 2? What are the techniques and tactics? How do you keep the vitality of Day 1, even inside a large organization?Jeff Bezos, 2016 Letter to Shareholders
As a reminder, Day 1 is about keeping the customer front and center at all times with a long-term mindset. Had a Day 1 mindset existed with the leadership team at SVB, would the bank run have happened? Or was it inevitable?
3. Inflection Points
Mike is not my favorite character in Hemingway’s, The Sun Also Rises. In an often-quoted line, he’s asked how he went bankrupt. “Two ways … gradually, then suddenly.”
Mike certainly experienced an inflection point that Andy Grove describes “is a time in the life of a business when its fundamentals are about to change” in his book, Only the Paranoid Survive.
Can we spot inflection points before they occur? Bryce Hoffman and his Red Team Thinking coaching practice have remained sticky in my mind ever since I interviewed him last year. And that reminds me of a similar concept, OPFOR, which stands for the U.S. Army’s Opposing Force.
HBR’s 2005 article Learning in the Thick of It is on my Top 10 list of their story archive. The authors explain the who, what, and why of OPFOR. Consider bookmarking this content when you have time to read it. OPFOR thinking will not teach you how to spot inflection points in the future. Instead, this concept could help us to be prepared for those big events when we are least expecting them.
4. The Giants of Sales
How about something positive?
It’s been twenty years ago since I read How to Win Friends and Influence Others by Dale Carnegie after I was requested (I mean required) to attend a Carnegie 13-week training course. I attended my first three-hour weekly session with a bad attitude. I left with an attitude that did not want to leave. I then devoured Carnegie’s book in one evening once I got started.
Tom Sant’s book, The Giants of Sales, is now one of my favorite books on this topic. He reveals there are only four primary sales methods, and he plays the role of historian masterfully with his four different role models who were pioneers in their selling techniques.
He devotes five chapters to Carnegie on the ability to influence by listening and caring about the other person. What I didn’t remember was that Carnegie encountered failure after failure after failure once he started his career. It was only by happenstance that How to Win Friends got published. Saying that his backstory is inspiring is a vast understatement.
5. My 15%
I’ve mentioned previously that I like mental models or frameworks with a number in the name. If you can find a copy online, you’ll find My 15% in The Applied Critical Thinking Handbook by the University of Foreign Military and Cultural Studies. Here is how My 15% is defined:
Most people have about 15 percent control over their work situations. The other 85 percent rests in the broader context, shaped by the general structures, systems, events, and culture in which they operate. The challenge rests in finding ways of creating transformational change incrementally: By encouraging people to mobilize small but significant “15 percent initiatives” that can snowball in their effects.
If you work on a team where weekly post-mortems are conducted, My 15% might be a great inclusion in that group discussion.
Recent CFO Bookshelf Podcast Playlist:
How One Founder Turned $80k Into $400 Million
Behind the Scenes of One of Our Favorite Podcasts
Return to the Little Kingdom
Accounting’s Impact on Human Capital
The Business Every Professional Should Manage for a Year
Thank You For Reading. Thank you for making this a successful newsletter.
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Always be learning and growing.
Title Photo Attribution: Source