The 5 Principles of a Minnesota Methodist

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Full disclosure: I was not raised in a church-y family, and although I was born in Faribault, Minnesota I haven’t spent a lot of my life there. Nonetheless, I was raised as a Minnesota Methodist, next door to but not quite the same as Garrison Keillor’s Lake Wobegon Lutherans.  And although Methodism is technically a creedal denomination, we put most of our emphasis on faith through good works. Here’s my version of the five things you need to do to be a Minnesota Methodist; feel free to join!

1.      Always feed your animals before you feed yourself. This one is pretty straightforward: take care of the critters who depend on you. And it has a practical Midwestern twist – by holding off your own dinner until you’ve fed them, you’ll never forget. There may also be a message in here about work before play…but that’s for you to decide.

2.     Choose kindness. This one seems simple, but can be a little harder in execution. Is it kinder to tell your colleague that you saw her husband out with another woman, or kinder to keep your silence? Usually, though, if the intention of kindness is kept front and center, the right action will follow.

3.     Do your work as well as you can. The variant of this is “do your work so you’re proud of it.” I think these two variations boil down to the same thing, doing our best on any given day, and at any given task. Taking responsibility in the work, and pride in a job well done.  This simple guideline takes you out of the realm of perfection and into, simply, the doing the best you can at the moment.

4.     Stand up for what you believe in. It’s no accident that Minnesota is considered a pretty progressive state, lots of Methodists standing up and being active for what they believe in. Action is the key – again, faith through good works.

5.     And keep a loaf of homemade banana bread and a tuna hotdish in the freezer, so you’re prepared for anything. The sudden death of a neighbor; a new baby; unexpected company. All merit an immediate visit to the family, with a gift of food in hand. I used to think this one was about getting good gossip (and that’s a side benefit, of course) but at its base it’s about community, and connection, and comfort.

I’ll leave with a link to a lovely poem from Julia Kasdorf, “What I Learned from My Mother” while I take a few minutes away from work to go and make a tuna hotdish and stick it in the freezer.

The Insurance Industry Is Getting the Shirley Sherrod Treatment

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In early July, the news industry and a number of politicians and government officials grossly over-reacted to an out of context news-bit in the case of Shirley Sherrod. The blowback was justified, and swift.

On July 28, it happened again. The news industry and a number of politicians grossly over-reacted to another out of context news-bit. This time it was death benefits’ insurance payments. The blowback is equally justified–but is nowhere to be found.

The reason is simple: Shirley Sherrod was a good woman maligned, and all it took was a few more minutes of video to prove it to anyone’s satisfaction.

By contrast, the insurance industry has no face to connect with the public, and their reputation is hardly warm and fuzzy. 

But since when should the reputation of the victim be allowed to justify bad behavior on the part of the press and the government?

The lessons should be the same. The reputation of the victim shouldn’t justify different treatment by press and politicians. The orgy of bombastic claims, the piling on of politicians and media alike are just as ugly and threatening to a free society as they were in the Sherrod case. 

Distortion and uncritical use of reports are an abuse of trust, regardless of target, and regardless of your politics. 

How the Press and Government are Reprising the Shirley Sherrod Mistake

It started with Bloomberg Markets Magazine on July 28. The headline was Duping the Families of Fallen Soldiers. That headline suggests a fraud; it suggests a particular class of victim; and it suggests an emotion-laden issue (fallen soldiers and greedy financiers).

The first paragraph then continues this three-part theme of fraud, victims and outrage:

"Life insurers are secretly profiting from death benefits owed to the survivors of service members and other Americans."  

The story then goes on to tell the sad story of the mother of a soldier killed in Afghanistan, who received a package, including what she thought was a checkbook, and who didn’t notice a disclaimer in the explanation. She was then “shocked” to find out her money wasn’t in an FDIC-insured bank.

Before I list everything wrong with this opening, let’s look at how politicians reacted:

The House of Representatives introduced a bill to set new rules for life insurance companies holding death benefits from policies of military…

Andrew Cuomo began an investigation, saying

“It is shocking and plain wrong for these multinational life insurance companies to pocket hundreds of millions in profits that really belong to those who have lost family members,”

The Department of Veterans Affairs says it will begin an investigation;

Defense Secretary Gates pledged help to assist the VA’s investigation;

“It’s disgusting, particularly in the case of dead soldiers, for insurance companies to be holding back” money from survivors, said Robert Hunter, Director of Insurance for the Consumer Federation of America.

“… insurance companies…profiting inappropriately from these service members’ sacrifice is completely unacceptable,” [said] Mike Walcoff, acting undersecretary for the VA’s Veterans Benefit Administration.

Senator Chuck Schumer says:

"It’s deeply troubling that insurance companies would promote these accounts as if they were run-of-the-mill checking accounts, yet the insurance companies profit from the interest, and provide no FDIC guarantee that the money itself is insured."

House Veterans Affairs Committee Chairman Bob Filner said he was “outraged."

The New York State Insurance Department pledged a review.

Even White House spokesman Nick Shapiro said President Obama “supports the VA’s immediate investigation" into the "unacceptable" practices.

What about the press?

Unlike the Sherrod case, where the left wing media gleefully jumped on Fox News, here they grabbed their own pitchforks. Mother Jones talked about Wall Street’s Dead Soldier Problem, calling it a scam.

Mainstream media? Here’s the CBS evening news preview: “A Fallen Hero: How an Insurance Company Profited.”

"The consensus is in: there is massive fraud being committed by major insurance companies; the victims are the bereaved families of our fallen military heroes; and the ill-gotten gains, as well as the damages, are massive.

And what’s John Q. Public to believe? You can sample the blogs and letters to the editor yourself, but here’s a typical one:

"Prudential is literally making money off dead soldiers. That’s sick. Seriously, have they no shame? Is there anything lower than that?"

 The only problem is—as it was with Sherrod—the headlines are far from the real truth. Very far.

The Real Truth: It’s Not about the Soldiers

The Bloomberg story, reported by David Evans, was headlined Duping the Families of Fallen Soldiers, and as I said the lead paragraph continued the theme. But the article itself contained hints of how wrong that was.

First, the practice in question is called “retained-asset accounts.” As the article itself says,

“retained-asset accounts have become standard operating procedure in an industry that touches virtually every American: There are more than 300 million active life insurance policies in the U.S.”

The article goes on to identify three firms that collectively manage over a million retained asset accounts. 

Now do the math. About 2.5 million people die annually in the US. There are somewhere over 1 million retained asset accounts. And the number of US troops killed in Afghanistan and Iraq since those two wars began is about 4,300. 

Contrary to what the article suggests—and regardless of what you think about our wars—the retained asset account story has almost nothing to do with soldiers. They look to account for somewhere under 5% of total policies.

Of course, “fallen soldiers” is just about as emotionally loaded as “reverse racism,” the concept that underlay the Shirley Sherrod debacle. And it worked just as well on knee-jerk politicians and journalists. But it’s not the whole story.

The Real Truth: It’s Not a Scam

As the insurance commissioner of the State of Connecticut says, “[this] practice has been in place for at least twenty years, with 0 complaints or problems reported in Connecticut.”

Two life insurance analysts at FBR Capital Markets say:

"Accounts that life insurers offer to set up for beneficiaries are a long-established product feature that is optional for consumers, who can choose to take a lump sum in cash instead, the analysts said.

In fact, the practice is the essence of what insurers do everyday, they added.

The bereaved mother at the heart of the story, Ms. Lohman, “believed that” her insurance monies were in a bank, and were FDIC-insured. Quoting the article, “The company’s letter omits that the money is in MetLife’s corporate investment account, isn’t in a bank and has no FDIC insurance.”

Unfortunately, Ms. Lohman “believed” wrongly if she thought “Prudential” was a bank, and that its funds were FDIC-guaranteed. Mistaken beliefs are not a surprising thing when one has lost one’s child. 

But that’s precisely the reason behind retained asset accounts: it saves you from dealing with the complex emotional reality of a check received around the same time as the funeral of the person whose death caused you to get the money. Who among us thinks right at such moments? The validity of the accounts is they let you defer an important decision until you are ready to deal with it, and offer some nominal interest in the meantime.

As to the “omission” about FDIC insurance, the letters also “omit” that they are not insured by Warren Buffet, or Jimmy Buffet, or the local buffet restaurant. Of course they’re not—they’re guaranteed by the insurance company (and often to levels much higher than the FDIC guarantees).

The Real Truth: There’s No Ripoff

Most of the stories on this issue play on the emotional themes of dead soldiers and financial greed; the combination is as old as the villain in a novel. But in this case, it’s manufactured. Again, from the original article:

"Prudential paid survivors like Lohman 1 percent interest in 2008 on their Alliance Accounts, while it earned a 4.8 percent return on its corporate funds…’I’m shocked…it’s a betrayal,’ [says Lohman]

Ms. Lohman may have been shocked, but I can’t see why reporters from Bloomberg news should be. That’s a 3.8% spread on liquid funds. What does your bank make on your checking account balances?   For that matter, how much does your bank pay you on your checking account?

How about Prudential’s customers? Again from the original article:

Metlife spokesman Joseph Madden says his company’s customers are very happy with the Total Control Account. “The feedback from TCA customers has been overwhelmingly positive,” he says. “The TCA affords beneficiaries security, peace of mind and time to make an informed decision — while earning interest in the interim.”

The Real Truth: The Story Headlined Is Not the Real Story Here

The most you can say about retained-asset accounts is that they may unfairly use small-print.

Again quoting from the original story itself:

“Quite honestly, we deal with issues that our members want us to deal with,” says Michael Stevens, senior vice president for regulatory policy at the Washington-based Conference of State Bank Supervisors. “This is not one that has drawn their attention.”

Connecticut’s Insurance Commissioner has said, "I am committed to strengthening consumer awareness regarding this issue… I will not, however, overreact to a misinformed, sensationalized story that did not include all the facts.” He’s right. Regardless of what suspicions this story may have generated about state insurance commissioners, he’s right.

The original article hypothesized that, when people found out ‘the truth’ about these programs, there could be a run on the accounts, similar to a run on banks. I’ll have to defer to a financial expert here, but I find that comparison hard to believe. However, if it ever came true, I think you’d have to look not at the insurance companies but at articles like this for irresponsibly provoking panic.

And that’s what this blogpost is about. What happened with this article is not in principle different from what happened with Shirley Sherrod. An initial article, given a massively misleading headline (just as the Sherrod video was massively out of context), provoked knee jerk reactions in the media and in our politicians.

The issue here is not insurance companies. This story is about instinctive, knee-jerk, swaying-in-the-wind, irresponsible reactions by the press and by government officials. 

That’s two times in just one month. How many more times before they get it right? 

It’s simple. Check your facts; don’t repeat gossip; tell the whole story. 

Note: I emailed the writer of the original Bloomberg article, David Evans, about 30 hours ago, telling him of this blogpost, and linking him to my previous blogpost on the subject.  I wanted to make sure I got his perspective, as he’s clearly been researching this article for sometime, and I think has been busy with fielding it since its publication last week.  However, as of this posting, I have yet to hear back from him. If I do, I will happily repeat here anything he chooses to say. 

Inbound Marketing, Inbound Sales, Inbound Life

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My guess is about a third of my readers know this subject way better than I do; and the rest have barely heard of it. Hopefully the third will forgive me my errors, in hopes of giving the two-thirds something of interest. 

My sense of inbound marketing is cadged together from several sources, and I don’t remember to whom I should give credit. Hopefully they’ll write in to claim it. Anyway, here we go.

Inbound marketing, nominally, is a reaction to many media-based forms of selling. Our phone has become an instrument for outgoing calls only. Email is beginning to resemble spam. We have spam filters for email, caller-ID and do-not-call lists for the phone, time-shifting and premium channels for video. All to keep marketers at bay.

The alternative is networks we choose: LinkedIn, Twitter, Facebook, and communal sites like The Customer Collective. We invite people in to those networks, and so we answer the “phone” or the “beep” or whatever. Those people, and those channels, are the ones we accept marketing from.

So how does one market to that channel? 

By serving Others. On Twitter, it’s doing 10 tweets about others to one about yourself. On blogs, it’s writing 10 comments on others’ blogs to writing one post on yourself. On LinkedIn it’s participating in 10 conversations to starting one yourself. And so on.

This is both radical and old as the hills. It’s radical for most mass marketers who are still trying to break through the email barrier, and for most corporate bloggers who think the world wants their official brand-spins. Basically, it’s radical for any marketers still trying to sell instead of offer engagement.

It’s as old as the hills for anyone who understands reciprocity. You give to get. You get what you want by getting others what they want. The love you make, you take, and so on. 

In the online marketing sphere, companies like HubSpot do a great job of offering high quality free diagnostics. Having gotten something of value, their customers become trusting, and curious. Trusting that HubSpot knows what they’re doing, and curious to find out more. The most natural thing in the world is to respond favorably to an open-ended question about whether they can offer more help. Of course, thanks for asking.

In the life sphere, we do the same. We like people who do not need, and who give of themselves. We do not like people who are needy, particularly those who deny it, and who seek to get without giving. Given the chance, we hang out with the former, and not with the latter. 

Thereby proving either the unfairness of life, or the paradoxical key to life, depending on how you look at it. 

If you get inbound marketing, I’ll bet you believe in the connectedness of people, and the basic decency of mankind. 

If you think inbound marketing is for fools who will only get themselves conned, I’ll bet you believe in the innate nastiness of people, and the need to protect yourselves from them.

Guess who’s happier.

It may not be quite all that simple—but mostly it is.

The Last Carnival of Trust

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Welcome this month’s Carnival of Trust.  It is an historic post, because it is also the last Carnival of Trust.

The first guest host of the Carnival of Trust was Ed. (short for Editor) of Blawg Review exactly three years ago in August of 2007.

It’s fitting that Ed. is also hosting the final edition of the Carnival of Trust, particularly since he was so instrumental in the development of the C of T. I want to thank him personally for his tremendous and selfless help in getting the Carnival off the ground, and for constantly being a source of support.

And before eulogizing the Carnival I want to make sure you read the current edition; Ed. has done a wonderful job of closing it out. He’s got great trust-related themes ranging from confidence in business to journalistic collusion to the question of whether anonymity destroys trust.  

Click over to the Blawg Review site to read the latest (and last) Carnival of Trust.

Why We’re Closing Out the Carnival

I want to be clear I consider the Carnival of Trust to have been a solid success. We were able to shine the light of publicity on a lot of well-deserving bloggers, and to offer concentrated doses of great writing to our readership, thereby enriching the lives of all concerned.

The Carnival was frequently cited as a leader in several Carnival reviews, notably the Carnival of Capitalists and On the Moneyed Midways. I’m proud of all that.

But at least for TrustMatters readers, things have shifted. We rarely get the kind of commentary we got in the past, and I think that’s for good reason. The role that the Carnival played for us in the past is increasingly being played out on Twitter and LinkedIn, and in community aggregators like the Customer Collective. 

I think this is simply a sign that communities of discussion have diffused. No judgment there, no right nor wrong, no regrets. But it does mean we’ll try to shift our efforts as well.

Know this: we are not killing off the Carnival. It will emerge, phoenix-like, in a different form. We’re still working on it, but it will contain periodic collections of thought pieces by others—pieces that we’ve separately either blogged about, or tweeted about, or commented on in other forums. We will also still accept submissions to the Carnival of Trust through the central carnival submissions site. 

So firstly, thank you for your past readership of the Carnival of Trust. Stay tuned for its new incarnation.

And I want to say an extremely special thank you to the great bloggers who have graciously given of their time and energy to host the Carnival of Trust in the past. We all benefited from their work. Here they are, including the link to the Carnival they hosted. 

The July 2010 Carnival of Trust
Hosted by Doug Cornelius at Compliance Building.

The May 2010 Carnival of Trust
Hosted by Julian Summerhayes at JulianSummerhayes.com.

The April 2010 Carnival of Trust
Hosted by Skip Anderson at his blog.

The February 2010 Carnival of Trust
Hosted by Bret L. Simmons at his blog.

The January 2010 Carnival of Trust
Hosted by John Ingham at Social Advantage

The November 2009 Carnival of Trust
Hosted by Jordan Furlong at Law21.ca

The October 2009 Carnival of Trust
Hosted by Scot Herrick at Cube Rules

The September 2009 Carnival of Trust
Hosted by John Caddell at Customers Are Talking

The August 2009 Carnival of Trust
Hosted by David Donoghue at the Chicago IP Litigation Blog.

The July 2009 Carnival of Trust
Hosted by Adrian Dayton at Marketing Strategy and the Law.

The June 2009 Carnival of Trust
Hosted by Dave Stein at Dave Stein’s Blog.

The May 2009 Carnival of Trust
Hosted by Victoria Pynchon at Settle It Now

The April 2009 Carnival of Trust
Hosted by James Irvine and Tripp Allen at The Egyii Blog

The March 2009 Carnival of Trust
Hosted by Beth Robinson at Inventing Elephants

The February 2009 Carnival of Trust
Hosted by Ian Brodie at Sales Excellence

The January 2009 Carnival of Trust
Hosted by Diane Levin at Mediation Channel

The December 2008 Carnival of Trust
Hosted by Stephanie West Allen at idealawg

The November 2008 Carnival of Trust
Hosted by Jim Peterson

The October 2008 Carnival of Trust
Hosted by Charles H. Green

The September 2008 Carnival of Trust
Hosted by Ann Bares at Compensation Force

The July 2008 Carnival of Trust
Hosted by Andrea Howe at The BossaBlog

The June 2008 Carnival of Trust
Hosted by by Clarke Ching at Clarke Ching—More Chilli Please

The May 2008 Carnival of Trust
Hosted by David R. Donoghue at The Chicago IP Litigation Blog

The April 2008 Carnival of Trust
Hosted by Mark Slatin at True Colors Consulting

The March 2008 Carnival of Trust
Hosted by Duncan Bucknell at the IP ThinkTank Blog

The February 2008 Carnival of Trust
Hosted by Michelle Golden at Golden Practices

The January 2008 Carnival of Trust
Hosted by Ford Harding at Harding and Company Blog

The December 2007 Carnival of Trust
Hosted by John Crickett at Business Opportunities and Ideas

The November 2007 Carnival of Trust
Hosted by Charles H. Green at Trust Matters

The October 2007 Carnival of Trust
Hosted by Steve Cranford at Whisper

The September 2007 Carnival of Trust
Hosted by David Maister at Passion, People and Principles

The August 2007 Carnival of Trust
Hosted by the Editor of The Blawg Review

The July 2007 Carnival of Trust
Hosted by Charles H. Green at Trust Matters

The First (June 2007) Carnival of Trust
Hosted by Charles H. Green at Trust Matters

Blawg Review #275

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This week, we are very proud to play host to the blog carnival for everyone interested in law, Blawg Review.  Trust Matters readers, please say hello to the nice visitors from Blawg Review. Blawg Review readers, welcome to our little sandbox and please make yourselves at home.

A Bit of History

It was two years ago and change that we played host to Blawg Review #150, so it’s high time we hosted again. 

Not only that, but the famously anonymous Ed. (short for ‘editor’) of the Blawg Review is simultaneously hosting this month’s Carnival of Trust. Touching, and appropriate, as Ed. played an enormous role in getting the Carnival of Trust off the ground at its inception.

But enough about common lineage. Let’s start with the post “Trust and Compliance” by Doug Cornelius, where he pretty much nails the distinction between those two key concepts (with a Jennifer Hagy cartoon for good measure). Which comes first?  Does one cause the other? Is one a necessary or sufficient condition for the other? When do we need trust, and when compliance? Doug is crisp, succinct, and I think solidly right. 

And wait—what’s this? More common lineage: Doug just happens to have hosted last month’s brilliant Carnival of Trust as well. It’s getting all incestuous around here. 

Moving right along.  Eric Turkewitz at the New York Personal Injury Law Blog gives some lessons on blogging etiquette and just plain class, and displays said class himself by using Walter Olson as an object example.   

David Kopel at The Volokh Conspiracy went to the movies and was inspired to write Understanding Inception. Two of the 60 comments sum it up: “Fantastic analysis of the movie,” and “the analysis was better than the movie.” Which raises an obvious conundrum—to go see a meta-movie, or to just read the meta-review? Maybe I’ll just sleep on it. 

Also in The Volokh Conspiracy, Eugene Volokh covers the law’s struggle with that age-old riddle, Q. when is a rape not a rape? A. when it’s religiously permitted. The lower court agreed; the appellate court reversed. 262 commentators continue the debate in the Green Room; hurry and you’ll be #263.

David Lat at Above the Law has the Quote of the Day: What Crawled Up His Robe?

Scott Greenfield at Simple Justice has a different spin on the same case, in Unexplained Removal For Unfortunate Hostility (Update: Explained, Sorta).  Judges are hostile all the time, says Greenfield—to the defense, that is. But why the unprecedented removal of a judge—is it for being hostile to the government?  SG is suspicious. A novel position for SG, but hey just because you’re paranoid doesn’t mean… And he just may be right.

Criminal Defense Attorney Mark Bennett at his law blog Defending People re-invents the concept of Inbound Marketing for lawyers: nothing makes you so credible as recommending others along with yourself. Read his Small Lesson. A lesson not just for lawyers, or even marketers, but for the Manual for Living Life.

Criminal Defense Attorney Mark Bennett, on his Social Media Tyro blog asks ‘which do you want–reputation or exposure?’  They’re not the same.  

Want your blog to drive traffic to your website?  Kevin, at Real Lawyers Have Blogs, asks the right question: Why Would You Want That?

Can you tell when someone’s lying?  That debate will continue unabated, but here’s a small cool part of the puzzle from Keene Trial Consulting, in We Know Liars When We See Them.  Folks who watch the TV show Lie to Me do not get better at telling when someone else is lying; but they do get a lot more suspicious about everyone.  Want to empanel a jury of conspiracy freaks?  There you go.  You’re welcome.

As long as we’re on the subject of not-nice behaviors, Dan Harris at China Law Blog raises an interesting question about bribery.  Does Your Home Country Even Care?  He notes a recent report on how actively home-countries enforce anti-bribery laws on companies doing business in China. Interesting to see which countries are high- and low-active countries; interesting, Canada, eh?

Big fish, little pond? Or little fish, big pond? Ashby Jones at the Wall Street Journal Law Blog has the answer: New Study: Forget the Rankings, Just Bring Home Straight A’s

Apparently HLS students agree with Jones’ blogpost above, being as how they’re all atwitter over a nonchalant attitude toward grades by a prof and the administration. Read Elie Mystal at Above the Law: Grading Shenanigans at Harvard Law School? Spring Evidence Students Confronted ‘Irregularities’.  Hey no problem; just send them a copy of that study,  Sander & Yakowitz’s paper, I’m sure they’ll get over their bad Harvard selves and see the light.

Frank Pasquale at Concurring Opinions helps distinguish between being Anti-Business and Anti-The Worst Businesses. There’s an added bonus in a lengthy comment to that post by Patrick O’Donnell.

What’s the penalty for offering to take sexual services in barter as payment for legal services rendered? In New Jersey, it’s a one-year suspension.  Bobby Frederick, of South Carolina Criminal Defense Blog, seems to think that’s odd.  Fuggedaboudit, Bobby. 

Walter Olson (not a lawyer, but the proprietor of the oldest "lawblog" Overlawyered) writing on the law at Cato about the ADA and the Chipotle Grill Experience. What does the ADA filing mill have in common with patent trollery, copyright mills, and “citizen suit” filings? They’re all like the sausage factory; pretty ugly inside.

Speaking of ADA, did you see last week’s Blawg Review #274 at LoTempio Law Blog, marking the 20th anniversary of the American’s With Disabilities Act?

In closing… Insurance lawyer George M. Wallace blogging personal interests on his "fool in the forest" blog.

And that’s it. Many thanks to Ed. for the honor and privilege of once again hosting the Blawg Review.  Followers of law blogs and regular readers of Trust Matters will find more great links to blogs worth reading in the last Carnival of Trust, hosted today by the Editor of Blawg Review.  Enjoy!

Who Can You Trust to Rake Muck if You Can’t Trust the Muckrakers?

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Last week, some reporters at Bloomberg came up with a pretty aggressive headline: Fallen Soldiers Families Denied Cash as Insurers Profit.

National Public Radio was not far behind: their headline read: Life Insurance Firms Profit From Death Benefits.

Holy profiteering, Batman! Did BP pay Prudential insurance to kick them off the front page? This one is pretty juicy. You don’t get much lower than the bottom-feeding off the bereaved families of those who made the ultimate sacrifice for their country.

 As the NPR story puts it:

Survivors of service men and women are told they’ll get a $400,000 life insurance payout. They don’t. Instead, Prudential — which has a government contract to provide life insurance for military families — keeps their money.

And as Bloomberg further explained, in a story about mother Cindy Lohman:

“You can hold the money in the account for safekeeping for as long as you like,” the letter said. In tiny print, in a disclaimer that Lohman says she didn’t notice, Prudential disclosed that what it called its Alliance Account was not guaranteed by the Federal Deposit Insurance Corp., Bloomberg Markets magazine reports in its September issue.

Is That Really Muck You’re Raking?

Now, Trust Matters readers know that I have been more than occasionally critical of untrustworthy behavior in the financial services sector. But something about this one just didn’t feel 100% right to me. 

I contacted a close friend who is a financial planner. “Is this as bad as it sounds?” I asked.

“Not really,” she said. “Pretty much that’s what happens to everyone. Someone dies, they really don’t want the check showing up at the graveside service, or worse yet at a wake.   Most families prefer to separate decisions about the distribution of money from the events memorializing someone’s death.”

She continued, "It just feels wrong to bury someone and then deposit a big check that was triggered by that very death. Creepy, basically. So the insurance companies, at least the ones I’ve seen, send you something that says you can have the money whenever you want, meanwhile we’ll put it in an interest-bearing account. The interest rate may be well below market – the spread on funds is pretty much how insurance companies make their money in the first place — but it’s not unusual. And they’re not in any big hurry to send benefits out to civilians either, as far as I know.”

At this point, the plot wasn’t exactly thickening—in fact, it was sort of thinning, as far as I could tell. Further articles suggested that the insurance company was not in a big hurry to tell people that they could get their money quickly, or that the interest rate was low, and that some of their actions could be interpreted as acting like banks.  But this looked like a small print kind of issue, the sort of garden-variety obfuscation that we have come to expect from things like credit cards and insurance policies.

Bad? Sure, but suddenly all those headlines about veterans and the VA began to seem a little misleading. This wasn’t about the VA, or veterans, at all.  We weren’t getting the whole picture, I feared.

Well, Something’s Getting Raked

Meanwhile, things were popping. Suddenly NY Attorney General Andrew Cuomo was sending out subpoenas about the scam. Defense Secretary Robert Gates pledged to help the VA in its investigation. The VA itself had already gotten into the action. And of course, congressmen had a (predictably outraged) opinion. Finally, there’s talk of a class action lawsuit pending.

At this point, I was reminded of yet another sad tale in the news lately: that of Shirley Sherrod. The lesson there, if you’ll recall (I know it was way last week), was not to jump to knee-jerk conclusions about apparently valid information that turned out to be taken out of context.

Except the Sherrod story came from an avowed right-wing vigilante; this story comes from Bloomberg News. I continue to believe there’s a very, very big difference.

And yet: how to make sense of this? How could experienced reporters from a business network come up with a headline about veterans, loaded with trigger-cues, but with a backstory that said nothing unique about veterans?

The answer started showing up a day later—from another business-savvy outfit not known for its radical politics, the Wall Street Journal Marketwatch. Read for yourself:

Randy Binner and Kevin Barker, life insurance analysts at FBR Capital Markets, questioned the [death benefit] outcry on Thursday.

"We find the very sharp and rapid regulatory response to this surprising and apparently unfounded," they wrote in a note to investors.

Accounts that life insurers offer to set up for beneficiaries are a long-established product feature that is optional for consumers, who can choose to take a lump sum in cash instead, the analysts said.

In fact, the practice is the essence of what insurers do everyday, they added.

"Investing funds ultimately due to customers in the general account to earn a spread over what is paid out quite simply describes the business of insurance," Binner and Barker wrote.

How Much Muck Can a Muckraker Muck if a Muckraker Isn’t Raking Muck?

Seems to me the worst case financial story here is another depressingly familiar tale of low-grade small-print-itis by the insurance industry. Hardly great, hardly trustworthy behavior—but far from the next great scandal either.

The much bigger story, I fear, is another mainstream news source failing to put a story into context. 

I’m one who believes that incompetence offers a far better explanation for screwups than do conspiracy theories; this is not a Breitbart situation. Maybe the reporters just didn’t appreciate that what they were seeing was insurance-related, rather than veterans-related. Though for a business news organization, that’s not too great either. The big problem is, the results—lack of context—are in the same category as Andrew Breitbart.  

So now who do we believe?

A couple key disclaimers: I am not an expert in insurance, or in the workings of veterans’ affairs. I have not spoken to the Bloomberg reporter on the case. I could therefore soon have egg on my face, so I will be watching the weekend news reports with interest to see if there’s an angle I’ve missed, and if I owe a mea culpa I’ll be on it quickly.

But one thing makes me think my gut may be right on this: Prudential closed up strongly on both Thursday and Friday.  And whatever else markets do, I believe they price pretty well. 

Upcoming Events 7/30/10

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Summer days–oh, how they keep us occupied. Between the beautiful sunshine that beckons us out and the sweltering heat that keeps us in, we’ve managed to keep our wits about us and our calendar in order. With September slowly creeping in, we’re set for the next few big events here at Trusted Advisor Associates. Are you?

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Tues. Sept. 21st      Global Access          Charles H. Green

Charlie will be a presenter in the 2010 Mediation Business Summit webinar. He’ll talk about how the sales process is a powerful opportunity to create trust and how behaving in the a trustworthy manner during the sales process both creates customer trust and enhances the odds of getting the sale. He’ll outline the principles of Trust-based Selling(r) and discuss how to respond to the Six Toughest Sales Questions. Cost: $100 to attend entire event 8 speakers, via telephone. For more information and to register, visit http://mediationbusinesssummit.com/register/.

Tues-Fri. Sept 21-24th          Chicago          Andrea Howe

Andrea Howe, Director of Learning Programs, will be a Learning Team Leader for Linkage Inc’s 2010 Best of Organizational Development Summit and will be leading a session on "Client Relationships: Making Yourself more Trustworthy."

Tues. Sept. 28th          Washington, DC          Andrea Howe & Charles H. Green

Interested in learning how to increase trust anywhere, with anyone, anytime? Register now for Trusted Advisor Associates’ signature program,  Being a Trusted Advisor: Walking the Talk, co-led by Andrea Howe and Charles H. Green. All early registration seats are filled;register now before the program sells out!

Carrots and Sticks and Money

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From VIP (very interesting person) Randi comes this story:

I was head of HR for a 50-person entrepreneurial startup. The CEO—Joe–was a proven big company corporate manager, and a strong believer in traditional management theories like pay for performance, measurement, and financial rewards. I  think they’re tricky, and over-rated.

Once we had a major online product launch, culminating on a Monday. Several folks in the IT group pulled a 48-hour all-nighter to get it all done. We pulled it off, and went live Monday morning without a glitch.

As we all celebrated, Joe decided to introduce his newest motivational tool—spot cash rewards. He went around, quietly handing out fifty-dollar bills to selected people, saying how much he appreciated their contribution to this team effort. 

Some were delighted. Then he gave one to a maintenance crewmember as he came from cleaning the men’s room. The guy’s face quickly reflected two emotions in rapid succession: WTF? And then ‘lemme get outta here before this sucker figures out who I am.’

Joe was a little discomfited. He then went up to one of the key IT folks who had spent the entire weekend in the office, approaching him with a big smile and handing him the $50 with a pat on the back. 

This time the look was different: more like incredulity, as in, “I do 48 hours straight no-pay overtime and you figure I’m worth a dollar an hour? Same as the guy doing his cleaning job on his regular shift?”

I said to Joe later, “now do you see what I meant about carrots and sticks?”

Too many managers automatically assume that carrots and sticks are the primary motivators of worker performance. At a macro level, it’s even worse; TV pundits and economists all overtly say things like “people are motivated by economic opportunity,” using that to justify the dampening impacts of raising marginal tax rates, for example.

It’s just not particularly true. Study after study suggest not only that extrinsic rewards are not only less powerful than intrinsic rewards, but even that the usual “soft” rewards (praise, recognition) are not tops in the motivation department.

An interesting recent study based on 12,000 diary entries suggests that the largest motivator of people is almost absurdly obvious: the sense of making progress in their work. A feeling of progress trumps all the others.

Carrots and sticks have their proponents, and their place; but as Randi suggests—they’re overrated.

Restoring Trust and Confidence in Business: Part II

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In yesterday’s blogpost, we critiqued the performance of a CNBC-selected all-star business panel. Their assigned subject matter was “Restoring Trust in Business.” 

We said their answers were largely non-responsive, and mainly boiled down to two: jobs and tax cuts. Make that one, actually, because the panel’s preferred route to jobs appeared to be tax cuts.

Suppose someone asked you, “How should we go about restoring a decades-long decline in confidence in business and the markets?” How many of you think the obvious answer is “tax cuts?” That’s not what first occurred to us.  

Of course, it’s easy to criticize, hard to be constructive. So here’s our attempt to answer the very serious question that CNBC posed: How can trust and confidence in business and the markets be improved?

1.    Communications. Let’s start by suggesting how you should behave when facing the public: for example, if you’re invited to speak on CNBC. 

Years ago, Robert McNamara gave this advice to dealing with reporters: “Never answer the question they asked you; answer the question you wanted them to ask you.” That may or may not be good advice for politicians, but it’s 100% wrong for businesspeople that want to increase long term trust in business.

Instead, give a direct, responsive and thorough answer to the question asked. Then, if you think the question is off-point, say so directly and quickly—and resist the inclination to speechify.

How does this help build confidence in business? Because business is often seen as lacking integrity. You don’t regain integrity by spinning people; you get it by behaving with integrity. 

Let’s define integrity as being integrated, or whole; in short form, being the same person to all people at all times.  If you’re going to treat the press antagonistically, we can only assume you do the same with employees and customers. If you tell truth to one party and lie to another, you aren’t a 50% truth-teller; you’re a 100% liar. 

Role model the trustworthy leaders you want us to see—don’t emulate Sunday morning politicians doing the spin thing. (Remember, they rate even lower than you do in the confidence ratings).

2.    Leadership: Why not step out from the crowd and acknowledge that business success is dependent on the quality of goods and services you deliver and not the difference in the marginal tax rate paid by corporations or highly compensated individuals?

Are you delivering the value you promise to customers and honoring the deal you make with employees? Are you treating your employees as ends in themselves, fellow-human-citizens to be treated with dignity? Or are you treating them merely as “human capital,” evaluating them via return-on calculations that can be monetized and compared financially with other asset classes?

3.    Incomes. Here’s what perhaps the leading academic student of trust, Dr. Eric Uslaner, has to say: “[taking] steps to reduce the gap between the rich and the poor is the single biggest factor in whether societies are more or less trusting.” Another key driver, Uslaner says, is education. Education leads to greater acceptance of others, more income equality, and a lessening in corruption. All of which help business’s reputation.

We in the US like to think we live in a meritocracy. But the data say otherwise. One survey concludes, “In the U.S., 50% of a boy’s chance of climbing the ladder is the result of his father’s income. In Denmark, it’s only 15%.”

Do the few billions extra paid to top executives for beating the street justify the health care cutbacks, layoffs or pay freezes imposed on average workers? Will your executives truly put forth less effort or will you sacrifice the quality of your leadership? Will your employees’ greater purchasing power and loyalty outweigh any difference?

4.    Time. It’s time to break the back of our epidemic of short-term thinking. Don Peppers and Martha Rogers say, “The Crisis of Short-Termism is the Mother of All Problems.“ Business people need to apply a systematic focus on longer time frames across all aspects of business: Why not pay for performance over the longer term, recognizing that “long term selfish” provides an equal if not greater reward than beating the quarterly expectations? 

Are you building a one-season team or creating a dynasty? Short-termism needs to be attacked in pension fund management, securities analysis, accounting policy, and in the curriculum of MBA programs. No one supports short-termism in theory—yet so many support it in their actions. It’s time to unveil the curtains and act on principles.

5.    Strategy. For decades now business’s focus has been on Competitive Strategy. We are now living in an age that demands Collaborative Strategy. From outsourcing to global capital flows to global terrorism to environmental issues—we are integrally connected for better or worse at this point. The critical issue is no longer how to beat one’s competitor, but how to thrive in a world of inter-dependencies. 

Treat your customers as allies, not as guardians of their wallet or as your competitors. Treat your suppliers as part of your team, not competitors to be dealt with through sharp contracts. Treat your industry association as a force for better quality and customer relations, not as a lobbying tool to gain competitive advantage. Stop going to leadership programs on competitive advantage, and start going to ones on collaboration.   

6.    Motivation. Reduce extrinsic incentives, increase intrinsic incentives: An HBR study recently pointed out that the top motivational factor is the one rated dead last by participants in a major survey on motivation: the number one factor is progress. This is astonishingly simple and obvious: people want to succeed at their work. Yet business insists on perpetuating the carrot/stick rats-and-cheese models of behavioralism from Pavlov and Skinner.  

Why not recognize that most employees (including leadership) take their greatest rewards from achievement and recognition, and that compensation beyond what it takes to meet primary needs is about scorekeeping rather than true reward? We all have mirrors in our homes…think how good it is to look in them and feel good about what we have contributed? No one’s epitaph says, “I should’ve spent more time at the office.” Stop treating workers otherwise.

So there you have it: our answers to “How can trust and confidence be restored to business and the markets.”

But, what do you think? Is it better, or worse, than “tax cuts?”

CNBC Asks Experts How to Improve Confidence in Business: Hmmm..

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On July 22, the Gallup organization released their 2010 poll on US Confidence in Institutions. As Gallup headlined it, Congress scored an all time low (for all 16 institutions ranked, not just for Congress). 

Barely beating Congress for lowest confidence ratings were, in order, HMOs (15th out of 16), Big Business (14th), organized labor (13th), and television news (12th). The Presidency, which also shows declines, still ranks 7th out of 16.

So it was fitting that CNBC (that would be in the 12th out of 16 group) put together a three part special panel discussion on “Restoring Trust in Business” (that would be in the 14th out of 16 group). The panelists included Gordon Bethune, Bill George and Myrtle Potter (representing the 14th out of 16 group), and Christie Todd Whitman (there wasn’t a category for ex-State Governors and Bush cabinet secretaries, but I’d hazard a wild guess she generally fit in).

Interestingly, there was consensus on the panel about how to restore trust in business. 

Answer: It’s the government’s fault.

How Good Shows Go Bad

Given Charlie’s blogpost of yesterday about the hazards of relying on those-who-summarize (including me), here are links directly to the show so you can make up your own mind.

The show—originally advertised (we recall) as “Restoring Trust in Business,” ended up after broadcast on CNBC’s website in three different sequences: “Leadership in Government,” “Leadership in Corporate America,” and “Leadership and Trust.” As CNBC’s John Harwood points out at the outset, the declining trends are long-term—since the 1970s, and particularly since 1994–and they apply across nearly all institutions. (See Gallup’s historical data, here.)

The four leaders invited have some fine credentials. Bethune was a revered CEO in the airline industry, where it’s very hard to be revered by anyone. George was a successful CEO, and writes on leadership. Potter was a COO at Genentech, and Whitman ran the State of NJ and the EPA. Good choices to opine about how business can regain confidence.

Give CNBC credit. Not only did they tee it up right, but nearly half the questions they asked more or less rhymed with, “how has business lost confidence?” or “how can business and the markets regain confidence,” or “what must be done for Americans to regain confidence in business?”

We would expect that the first thing we’d hear from any one of these leaders on the subject of restoring confidence in their institutions would be a straightforward acknowledgment of what was lost, and a statement of responsibility for having lost it. Is that not unreasonable to expect of distinguished leaders?

And indeed, every leader did get off at least one direct acknowledgment that business might have to improve itself—but having done the curtsey toward the question, the bulk of their comments were reserved for tax policy, government regulatory foibles, and flawed federal government policy. 

Instead, here’s what we got (we’re paraphrasing: go ahead, check our interpretation here.)

Q. If you look at the data Hartman reviewed before for us, the congressional approval rating is low. Yet contrast that with the issues that got accomplished this year; various reforms—what is it that isn’t connecting here? 

Whitman: You’ve seen a move in government away from policy to politics; everything’s partisan now. (She then proceeds to attack Nancy Pelosi).

Q. What do you think needs to be done to restore trust in business?

Potter: Business needs to take responsibility for stewardship and its own governance. We can think of examples where that didn’t happen. We also have to think carefully about how we’re paying so we can drive innovation. Innovation used to drive the world from the US, but not now.

Q. I’m interested in your view, Mr. George; you say the crisis wasn’t caused by subprime or derivatives. Wasn’t it caused by flawed leadership putting its own interests before its clients or its people?

George: No question about that; we saw flawed leadership in Enron and all the companies that blew up back in 2003, we saw it on Wall Street. Most of those leaders and their companies have gone away. But it is about leadership in government. We need to emphasize policy not bickering; we need a jobs policy. I’d like to see the President step up to a rebuild America program. 

Q. In terms of business’s relationships to government, why doesn’t it seem to be working? 

Potter: Well everyone’s feeling the crunch, but what stands out is jobs. Jobs are so critical to America feeling more confident about the country, and yet this chasm has to be closed between government and business.

Q. What is your best advice to the administration on what can be done to restore trust and confidence in business and in Wall Street? 

Whitman: Clearly we need a rigorous regulatory policy, but we need to stop this gotcha attitude of blame-throwing in congress. The BP disaster turned into a criminal investigations instead of focusing on how to fix things. Clearly there was a problem on the regulatory side as well. We need to show respect for each other.

Bethune: You have to demonstrate some performance, not talk. No one in our government ever ran a business. The administration shouldn’t have focused on health care or regulatory reform, but on jobs…business doesn’t like uncertainty.

Q.  Most people don’t expect as good a world for their kids as they had.

Whitman: The main thing is we’ve got to do is get deficit spending under control.

Q. One reason people don’t have trust in business is that, at the height of the crisis, big financial companies took big bonuses and were bailed out: what’s your take on that, Mr. George? 

George: Goldman didn’t pay any bonuses last year. Trust is the fuel that enables society to run….but we need policies from government that create incentives. Goldman, JPMorganChase and are rethinking compensation to have pay for performance….investing in America….lower capital gains tax. But that won’t solve this jobs crisis. We’ve got to get back to investing in America.

Q. What is your one piece of advice that would reassure people that the future is going to be better for them?

Bethune: Tax policy; articulate it, make it pro growth, pro business, put cash to work, make the future clear in order to get confidence.

You be the judge, but let us suggest a simple headline. 

When the institution that ranks 14th out of 16 shows up to talk about restoring confidence in their institution—given a decades-long decline—we ought to expect something more than a short-term political bashing of the 7th– and 16th-ranked institutions, a la the Sunday morning interview shows.

Business, heal thyself.

(At this point, you might be thinking, "Oh yeah? Think you guys could do better?"

Well, yes we do, and that’ll be tomorrow’s blogpost.  Tune in again.)