The Crisis 

Well, it's been an interesting week so far, particularly for the financial markets.  At last an upsurge!  The general feeling seems to be that this may be just a blip on the graph and the market will start to go down again.

If you're looking for a very good explanation of how the US and ultimately, the world got into this mess, then go to Matt Taibbi's story in the Rolling Stones magazine.  Here's just a sample of what Matt has to say:

The latest bailout came as AIG admitted to having just posted the largest quarterly loss in American corporate history - some $61.7 billion. In the final three months of last year, the company lost more than $27 million every hour. That's $465,000 a minute, a yearly income for a median American household every six seconds, roughly $7,750 a second. And all this happened at the end of eight straight years that America devoted to frantically chasing the shadow of a terrorist threat to no avail, eight years spent stopping every citizen at every airport to search every purse, bag, crotch and briefcase for juice boxes and explosive tubes of toothpaste. Yet in the end, our government had no mechanism for searching the balance sheets of companies that held life-or-death power over our society and was unable to spot holes in the national economy the size of Libya (whose entire GDP last year was smaller than AIG's 2008 losses).

Matt's a financial lay person and had to do a lot of research and interviews to get his head around the topic, so it's an interesting, at times humorous and most importantly an enlightening read.

I think Matt is quite right (and something that I have been saying for a long time) when he says:

People are pissed off about this financial crisis, and about this bailout, but they're not pissed off enough. The reality is that the worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup d'état. They cemented and formalized a political trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations.

This is a must read article for all who are serious about being informed of what's happening (or not happening) in today's financial and political spheres.

If you would like an economists view of this, then I would recommend "The Return of Depression Economics" by Paul Krugman.  Krugman is a Nobel Prize winner in economics and his book is a very easy and enlightening read on all of the recessions and depressions that have befallen us over the last century.  It's the first economics book that I have read cover-to-cover, if that's any recommendation.  I hope to review it later this week.   If you happen to read Krugman's book, you'll see how spot on a financial lay person like Matt Taibbi can be.

The People

In discussions with friends and colleagues from around the globe this week, I've come across an interesting phenomenon.  As the financial crisis took hold, people in firms gathered together and supported one another.  It seems that the usual response of an external threat was taking place - we're in this together and we can support one another through the difficulty.  For example:

• There is more sharing of information and knowledge
• People will go out of their way to find out what others are doing and how they can help
• People get together more at a social level (for example, business lunches are back in)

That seems to have gone on, and still is the case in many firms.  The exception seems to be where there have been lay-offs.  Once people are laid off, the mood and the response from those that stay, changes:

• People become less sociable
• At the lower levels, staff start to emphasise (publicly) what they are achieving (sometimes even at the expense of others)
• On the other hand, some staff retreat into themselves and hope "that it will all go away soon"
• Managers become less visible and remote.  They are always in meetings.  When asked about "What's happening?", very little of the real story emerges

Managers - what to do?

In tough times, people revert to their basic needs - security, food, shelter.  So, whilst it's important to share company information, it's also very important to cater for these basic needs.  More socialising, interacting and even physical contact (hand shaking, hugs etc).  One colleague I spoke with took his four direct reports to the football - a first for him and the firm and the mood within the team has improved dramatically since.

People can only do their best work when their basic needs are catered and cared for.  In these times, it's important to stress security, food, shelter before talking about business performance.

And speaking of things "social" . . .

Last weekend my wife and I together with another couple visited the town of Appenzell in one of the smaller cantons of Switzerland.  To give you some idea of the area, the tourist brochure describes it as:

Appenzell and the canton of Appenzell Innerrhoden lies in a very picturesque, hilly landscape to the south of Lake Constance.  Rambling and climbing on the Alpstein and the region's independent culture, fashioned by long-held rural customs and religious traditions, are the highlights. With around 7000 inhabitants, Appenzell is the political, economic and cultural hub of the smallest of the Swiss cantons: Appenzell Innerrhoden. The smart alleyways with their numerous small shops in the car-free eastern-sector invite passers-by to stroll and enjoy leisurely shopping outings. Houses adorned with many murals are a characteristic of the region. The Appenzell Museum in the town hall and the «Im Blauen Haus» [In the blue house] private museum exhibit a cross-section of local history and culture.

Apart from the amazing scenery and the friendly locals, the interesting thing about Appenzell is the way the region is managed.  Once a year, all of the inhabitants (up to 7,000) meet in the village square to vote on the council issues for the coming 12 months (including the budget).  Now that's democracy!

The pics in this blog are from Appenzell.

Cheers

Bob