.jpg "Great Hits Never Fade")
We’re taking a little break and going off-blog-grid for a few days:
To paraphrase Mark Twain: Persons attempting to find a motive in this action will be prosecuted; persons attempting to find a moral in it will be banished; persons attempting to find a plot in it will be shot.
But to keep the withdrawal symptoms to a minimum, we shall be reprinting a few from the archives.
Today’s golden oldie is: Closing the Book on Closing
We’re taking a little break and going off-blog-grid for a few days:
To paraphrase Mark Twain: Persons attempting to find a motive in this action will be prosecuted; persons attempting to find a moral in it will be banished; persons attempting to find a plot in it will be shot.
But to keep the withdrawal symptoms to a minimum, we shall be reprinting a few from the archives.
Today’s golden oldie is: Operating Transparently
We here at Trusted Advisor Associates earn our daily bread by helping clients to become Trusted Advisors to their clients and to each other, and by helping clients create Trust-based Selling programs.
That’s our daily work—specific applications of trustworthiness. To do so, it also helps to take a broader look at trust. That’s one role of this blog, Trust Matters.
A similar role is occasionally played by media, who come up with specials on the subject of trust. Such an event was Forbes’ Magazine’s recent issue, The Trust Gap. Nicely edited by Raquel Laneri and Michael Noer, it consists of fully 19 articles, covering a wide range of trust-related topics. I purposely printed them all out, and read them on the plane to Orlando last night uninterrupted.
Turns out it makes for fascinating reading: mainly because it shows once again the amazing range of issues which influence, and are influenced by, the phenomenon of trust. I’d offer you a link to a combined file, but I’d probably run afoul of some copyright law, so you’ll have to do your own mix tape. (Although–it just occurred to me–I’ll bet you could probably buy a print copy of the magazine somewhere!).
To see if it’s worthwhile for you, here are a few observations from me:
Caveats
Remember this particular collection came from Forbes Magazine. To my mind, that means it’s eclectic, though with a generally capitalist-cum-libertarian bias. Which means you get some creative thinking, though at the price of the occasional slog through such stuff such as:
· the 1971 departure from the gold standard was the root of all our ills;
· Obama is a deceiver because he said he’d work with the Republicans, yet passed many bills without a Republican vote. Puh-leeze.
Still, those are a minority.
Some Highlights
James Henry and Lawrence Kotlikoff start by citing Anna Bernasek (see Trust Quotes Series #6 interview with Anna), then go on to suggest that our long, slow, decline of trust in institutions has a simple cause—complexity of government. And, they have a solution. Five of them, actually—one each for taxes, banking, health care, social security, and offshore taxation. They’re sweepingly broad, startlingly commonsense, and—you sense why this is a virtue—simple, while not being ideologically simplistic.
Joel Kotkin, in Tribes and Trust, makes the case that the decline of social trust and trust in institutions as we’ve come to know them are offset by equal increases in our tribal affiliations. By “tribes,” he doesn’t just mean movements in Asia, and China as a whole, but also economic groups like “investment bankers, techno-geeks or gays.” Though, this trade is not net good.
Harvey Silverglate tells us, in "Trust me: Justice is my Last Name" that there has been a systematic, growing increase in the abuse of the justice system by Federal Prosecutors. If true, that one’s scary.
I don’t know that I’d agree with Henry Miller on everything , but he’s made a nifty observation by identifying the Type 1 vs. Type 2 risk equation facing regulators; and having done a stint at the FDA, we owe him a good listen. If you’re a regulator, which is worse, he asks: the Type 1 error of approving a disastrous product, or the Type 2 error of not approving a good product. You don’t have to be a self-aggrandizing bureaucrat to see how we’d all respond conservatively in such a situation; and the policy implications of that low trust are large and ugly.
Pollster Zogby notes, in Mending America’s Broken Trust, an interesting anomaly: Republicans trust Wall Street more than Democrats, but are also more likely to think that bankers got a sweetheart deal in the bailout. Which suggests their core belief is more anti-government than pro big business.
From across the pond, Quentin Letts reminds us gently in Skepticism is More Powerful than Trust that a healthy dose of skepticism—quite a dose, actually—is periodically a very good thing. Furthermore, public shaming is still powerful; witness the official who used public funds to build a duck house, and was followed about town by people flapping their elbows and quacking. He resigned.
On the other hand, Melik Kaylan in Relationships of Mutual Mistrust suggests the risk of shaming can get way, way out of control. Citing a former secret police officer in Rumania, where there is no privacy, the threat of blackmail is a constant presence. In his view, this same sort of risk is posed by Facebook et al, and serves as a chronic negative drip against the development of trust.
Larry Ribstein has a piece I resonate with, called Battling the Mistrust-makers. He points out how, in contrast to just about everyone else’s claim that trust is declining, in certain ways it’s increasing: we are more and more dependent and intertwined with others. But there’s a force battling the kind of trust we need for successful economic cooperation, and that’s what he calls the “mistrust-makers.” He particularly singles out the media, politicians, and the plaintiff bar. In light of the Shirley Sherrod case, and the much ado about nothing case against death benefits payment cases in the insurance industry, his commentary is timely.
To end up on a (partly) upbeat note, Karlyn Bowman, in Distrust: as American as Apple Pie notes that with all the declining numbers about trust, Americans are still positive on their constitutional system of government and core values like the belief in America as the land of opportunity. (There are some data to suggest that last belief is not so well-founded these days, but let’s not quibble about a happy ending note).
Growing up as a cub consultant, billable hours were without question the defining metric in the consulting industry. It seemed obvious therefore, that achieving success would be dependent on increasing my billable hours. I was hardly the only young consultant to come to this obvious conclusion.
Fortunately for me, I found a mentor who took me aside one day and explained that billable hours shouldn’t be seen as a goal; instead, I should see them as the outcome of the quality of my work. In other words, if my work was good, there would be no shortage of hours. From that perspective, billable hours were an indirect and lagging indicator of quality.
His message was loud and clear: I should worry less about my direct output metric, and focus more on the principles, behaviors, and attitudes with which I approached my work. It was, in retrospect, the most important lesson of my consulting career and one too few others are taught.
In that light, two recent blog posts caught my attention. One was by Charlie Green, in which he recounted a fable with a choice between trust and measurement. Another was by Chris Brogan, extolling the virtues of a trust agent at LinkedIn. The coincident timing of these two posts, with my own experience, drove the title of this post.
Is it possible that, as my mentor warned, we have systemically driven a wedge between the practice of good management and the tools of measurement? Has the relationship between driver and driven been reversed? Has the metric become the goal in itself rather than the outcome it sought to measure? Has measurement become the enemy of management?
Of course, good measurement should serve management. It has always been an important element of managing, it tells the good manager where to look although not what to do. There is nothing intrinsically that sets management at odds with measurement until the manager uses the metric as a substitute for judgment. How many companies established arbitrary targets for reductions in force in the recent recession rather than gaining a broad and deep understanding of where capacity could be reduced without damaging long-term capability?
I’m beginning to fear however, that measurement is replacing management. Several pervasive and tectonic factors have driven the two apart. One is simply, for lack of a better term, the modularization of business. Business process reengineering, supposedly invented 25 years ago, has taught us to break businesses into many pieces, and to achieve full scale economies (hopefully at a global level) in each of them.
That kind of approach demands that each module fit neatly with the next, the same way that couplers enable railcars to effectively and efficiently hook up and create a train. The “couplers” of choice have almost always been metrics. If we can specify measurements that our suppliers must meet, then we can have the best of both worlds – customization and scale. The more modularized our businesses, the more we manage by measurement.
Question: Did the folks managing the Deepwater Horizon rig think about the revenues and profit BP would gain from a safe and successful well in the Gulf and conversely the risk of a disaster? Or did they think about the bonuses that would go along with meeting budget and timing expectations for getting the drilling done and the rig moved?
Of perhaps more direct importance is that we have simply become more short-term and reward driven in business then we were 100,000 years ago when I was a pup. My fellow consultants who obsessed about their billable hours may not have had as much long term success in their individual careers as those who paid attention to quality and long-term relationships, but it seems that they have won the measurement war. The true tragedy is that the measures that may have merit when looking at a large scale organization, may destroy trust and relationships at the individual level. Charlie wrote about the dangers of measurement focus as it relates to sales and client relationships in his February 2, Business Week article, Metrics: Overmeasuring Our Way to Management.
The dominant belief systems today in business include “maximize shareholder value,” “if you can’t measure it you can’t manage it,” and “what’s the net present monetized value of that.” Finance is the driving function of today’s business world; in my day, that claim was held by the value producers. Too often we drive for the metric itself, forgetting that the metric is supposed to measure something bigger, deeper, more important and fundamental. To use the consulting analogy, we are all focused on monthly billable hours instead of value for the client. “Pay-for-performance” has become shorthand for lazy management. If you assume that the numbers are everything, then you don’t need to dig beneath the numbers to find out their drivers.
Actually, I suspect it goes deeper. “Pay-for-performance” is also an expression of lack of trust. It comes from an unwillingness to trust others to do the right thing in a business context; what we view as risk mitigation is in fact a form of management by asphyxiation. Managers throughout organizations know that it is the metrics that matter…the overall outcome is incidental. We have replaced “no pain, no gain” with “no risk, no loss” when it comes to developing managers and finding creative ways to add new value.
To go back to Chris Brogan’s trust agents, does your company know who its trust agents are? Does your organization support, value and reward its trust agents? These are the people who chose door number one in Charlie’s fable….choosing to have the highest level of trust while giving up the ability to have it measured.
So a question for the readers: Has measurement become the enemy of management? Or can we have it both ways?
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.
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.
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.
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
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!
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.
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.
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.
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.
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.