Steve Shu's 21Publish Blog

While last year?s forecasts focused on the deficit and the exchange rates, what came to the forefront this year were three things that will impact the economy for the next twelve months. These are: the (deflating) housing bubble, term structure of interest rates (and the inverted yield curve), and the philosophies and makeup of the new chairman (Ben Bernanke).

Although I will gloss over the individual perspectives of the two speakers, my general takeaways on the three areas were the following:

• Housing bubble is deflating ? Apparently in the areas of concern (e.g., Boston, Southern FL, CA), prices are starting to fall 10%ish. Well-known builder, Toll Brothers, has had its stock price fall some 50% (note I have not verified), plus they have cut back their forecast out building. Inventories are starting to build up. If one subscribes to a doom-and-gloom forecast, housing bubbles have led to price declines of an additional 40%.
• Inverted yield curve is disturbing ? In 8 of 9 times when the yield curve inverted, the economy has slumped into a recession within one year.
• New chairman philosophically tends towards being a price-level setting person, as opposed to one that takes a long-term view of the economy first ? Price-level setting philosophies, involve having a target inflation rate in mind, and then set the interest rates to obtain that rate. In some countries, this policy is taken to an ?extreme? where concern for other factors, such as unemployment rates, are ignored. Wild cards in the U.S. include the fact that the international world is less stable, and that long-term energy/oil impacts associated with unstable countries (which may each comprise 5% to 6% of supply) should not be ignored when pursuing price-level setting at the central bank.

So all-in-all, the forecast for the U.S. economy over the next twelve months was mildly positive, with some areas for attention. The March meeting for the central bank will be key, as this will shed some light on how the new Fed chairman handles his new role.

Which brings me to my earlier about getting into Central Banker Heaven. Greenspan has been praised by having all of the key skills and a performance record:

• an ability to show independence from the administration and partisan views
• deep knowledge of history and economics (which both Greenspan and Bernanke share)
• inflation-fighting skills with a long-term view.

But in some sense, while Greenspan has had all of these skills, it could be argued that he also got lucky (being good and lucky is the best of all worlds). During Greenspan?s tenure, he did not have to deal with chronic problems. Now, Ben Bernanke has a tough and important job ahead of him. He has a chronically unstable international world to deal with, and he has to show his inflation-fighting abilities with a long-term view that people like Greenspan so carefully considered.

I thank Alan Greenspan for his service. I wish Ben Bernanke the best of luck for our people and future generations.

In the report I was reading, there was a picture of a less-frequently used perceptual map that grabbed my attention. Basically instead of products, the perceptual map placed cell phone features (e.g., calendar, push-to-talk, text messaging) on a two-dimensional map with the axes ranging from a) low- to high-technological advancement and b) high-entertainment to high-utility.

Based on the features (each a point) on this perceptual map, one could identify five primary clusters of points. These clusters were essentially viewed as market segments of mobile phone consumers and were divided as follows:

1. Picture people (camera phone lovers)
2. Gotta-have-it-all types (e.g., Motorola RAZR types)
3. Plain old telephone people (basic phone users)
4. Organized telephone people (e.g., like calendar features in the phone)
5. Always on-the-road types (e.g., like productivity & synchronization functions)

It?s funny when you look at the high probability demographics for these mobile phone segments (and I will take some liberties here to boil down the paragraph of demographics to a few words (demographics match the listing order above and have *not* been written to be politically correct):

1. females, without children, poor
2. males, dumb, low income
3. females, married, dumb, poor
4. females, married, poor
5. males, married, highly educated

I fall into the organized telephone or plain telephone crowd with my basic Siemens flip-phone. What does that say about me? I?ve never really cared too much about image, but what am I communicating to people by my use of phone? Is your ringtone a mating call in disguise? What does your phone say about you?

Two areas that created an ?ah-ha? for me with respect to helping me recognize my leadership style were related to going to business school and getting support from a client executive to develop the business skills one of his line managers. Had it not been for these two events, I probably would have turned out as an engineer focused on individual contributor work as opposed to a person focused on business within the technology space. While either of the outcomes is perfectly fine, I am happier that I have found the business slant is more the ?natural me?.

The first step in going to business school helped me to develop my leadership skills by explicitly forcing me to focus on thinking about and analyzing business issues, as opposed to passively addressing business issues while working on the job. Business school also gave me an extra level of confidence in knowing that I had spent dedicated time to try to improve my knowledge.

The second step may have occurred, in part, by chance. During a management consulting engagement I was involved with, I was sitting in a three-person, executive review meeting with one of the partners of my consulting firm and the president of the company. The upshot of the meeting was that one of the functional managers was not performing too well and both the president and the partner wanted me to coach the functional manager to help him take his management skills up by an order of magnitude or the functional manager would be fired. What followed from there was some behind the scenes work in analyzing how to approach the situation and then direct assistance with the functional manager to improve the business. After that particular client engagement, things started ?clicking? for me, and I was able to get into both interim and direct management roles more regularly to foster my leadership skills.

The upshot of all this is that combining knowledge, practice, and a real environment to foster one?s management and leadership skills helped me to breakthrough and reach a new level (one-time, discontinuous improvement as opposed to gradual change). While the process of improvement may have taken many years with slow growth, I was suddenly able to get things to click together.

I have found similar discontinuous improvements in other areas of life. For example, in tennis, I remember going to tennis camp and getting a breakthrough on getting better control with my one-handed backhand. In drumming, I started to study a completely different style of music (jazz fusion instead of just progressive rock music drumming). The knowledge had to sit for awhile, but one day it all clicked and took me up a notch when I least expected it. If I hadn?t prepared for the time when the conditions and environment were right, I wouldn?t have reaped the benefits. Sometimes I think working on leadership skills might be in the same vein.