Written Voices Blog

One of the most common mistakes made in the retirement investing world, particularly among 401(k) participants, is over-concentration in an employer’s stock. In an analysis of more than 100,000 401(k) participants from companies offering stock in their 401(k) plan, more than 54 percent of employees had stock concentration levels that were greater than 20 percent of their total account, an amount that is enough to significantly decrease their median forecasts. In fact, loading up on your employer stock is even worse than loading up on a random individual security. Why? Because chances are your job (and hence your future income) is likely to be highly correlated with how the company stock performs. If bad things happen to the industry or the stock of your employer, you are likely not only to lose your money on the investment, but possibly your job as well. As the unhappy former employees of Enron can attest, this double whammy effect can be devastating, particularly if you are nearing retirement. This implies that you should be even less likely to want to hold the stock of your employer than you would be to hold the stock of a random company. Unfortunately, surveys suggest that many employees do exactly the opposite, loading up on their employer stock in their retirement plan.

People often confuse a good company with a good stock. Your company may be the most amazing, creative, world-dominating, run-by-geniuses firm around, but that does not mean that the stock is undervalued. Chances are, all that good stuff about the company is already factored into its price by the market. To determine that something is undervalued, you have to have information about the future prospects of the firm that are not understood by the market. If it is public, you can bet that the markets have already digested the information. If the new information is private, you are prohibited by law from trading on it (this is called insider information). Never make the mistake of assuming that a great company implies a great stock.

Sometimes the impact of stock volatility can be counterintuitive. Consider an investor at the beginning of January in 1997. Let’s say this investor consulted a magical genie and was offered a stock pick that would return an average of 37 percent per year for the next six years guaranteed. The genie states that there would be many bumps along the road, but the investment was guaranteed to have average annual returns of 37 percent. The investor does a quick calculation in his head and determines that if he invests $100,000 in the stock and gets an average annual return of 37 percent, then he stands to make about $560,000 over the next six years. Not a bad deal, right? Sure, there will be some volatility, but those guaranteed average annual returns look pretty good. The investor thanks the genie and promptly goes off to invest his $100,000 in the recommended stock.

Fast forward six years later to December 31, 2002. As promised by the genie, the stock pick has achieved annual returns of 37 percent over the six-year period. But the investor is astonished to see that his account balance is only $80,130. He actually lost 20 percent of his money! What the heck happened?

The stock in this example (JDS Uniphase Corp.) actually did have average annual returns of 37 percent over the period January 1, 1997, through December 31, 2002. But the growth rate (which takes into account the impact of the volatility) was an anemic -3.6 percent per year. The average return was pretty good, but the volatility of the stock’s performance killed the growth rate.

The stock had extraordinary performance in the period leading up to early 2000, but this was matched by equally poor performance in 2001 and 2002. The result was that average returns were strongly positive for the six year period, but the overall cumulative performance was poor. This is an extreme example, but clearly demonstrates the danger of focusing too much attention on average returns without considering the impact of volatility. Remember that volatility matters a lot in accumulating wealth over time.

The above is an excerpt from the book The Intelligent Portfolio
by Christopher L. Jones
Published by John Wiley & Sons, Inc.; May 2008;$27.95US/$30.99CAN; 978-0-470-22804-3
Copyright © 2008 Christopher L. Jones

Author Bio
Christopher L. Jones is Chief Investment Officer and Executive Vice President of Investment Management for Financial Engines. Working closely with founder William F. Sharpe, Jones built and led the team of experts in finance, economics, and mathematics that developed the financial methodology for Financial Engines’ personalized investment advice and management services. Jones has led the investment management function at Financial Engines for more than a decade. He holds an MS in business technology, an MS in engineering-economic systems, and a BA in quantitative economics, all from Stanford University.

Financial Engines, Inc. is a leading provider of personalized investment advisory and management services to investors in workplace retirement plans. The company provides advisory services to more than 6.8 million employees, including workers at 109 Fortune 500 companies. In addition, Financial Engines manages more than $16 billion in defined contribution assets for individual employees as of year-end 2007. All advisory services are provided by Financial Engines Advisors L.L.C., an independent registered investment advisor and subsidiary of Financial Engines, Inc. Financial Engines does not receive compensation based on the investment it recommends.

We are in a bear market, but Wall Street will never admit it.  It is so emphatic in a bull market, but loath to address bad times.  I know the market is only off 10-15% from its October 2007 peak, but just wait.  I spent 32 years as a securities analyst on Wall Street, and unlike the current youthful generation of analysts, I experienced several major downward cycles.  The current economic and financial backdrop is probably the worst since the 1930s depression.  But it doesn’t seem like that if you listen to stock brokerage commentary, TV media or the government.

It is hard to keep track of all the bubbles, especially those that have not yet quite burst, such as oil and commodities, commercial real estate, consumer credit and stocks.  Busted bubbles are more obvious, but the degree and duration of the damage is still unknown — residential real estate, sub-prime mortgages and CDOs, debt derivatives, banking and brokerage system, U.S. dollar, federal budget deficits and spending, bond insurers, employment, GDP growth, etc.  The official inflation CPI reading in March was +4%, but the reality with all in, adjusting for the convoluted government numbers, is in the range of 7-11%.  And it will get worse.  Future inflation will be exacerbated by the ongoing massive federal bank, brokerage and other quasi-agency (Fannie Mae, etc.) bail-outs.

The economy runs in cycles; full recessions every few years.  The last real downturn was in the early 1990s; the one in 2002 was incomplete.  Recessions and stock market plunges have a cleansing effect, setting the stage for renewal and the next expansion phase.  The Fed cannot keep the system propped up forever.  It is running out of silver bullets.  Lower interest rates are not stimulating the economy. There is a pyramid built on huge debt leverage.

Derivatives are like the iceberg ahead of the Titanic: No one knows the dimensions beneath the surface.  We do know that credit default swaps amounted to $62 trillion (with a T!) and interest rate derivatives to $382 trillion (again with a T!) at the end of 2007.  Staggering!  When Warren Buffet acquired the General Re insurance company, he wound down that entity’s derivatives over a five-year span, losing $400 million in the process.  That was when the markets were normal, before the credit freeze.  The elimination of trillions in derivatives, some extending 30 years in multi-currencies and exchanges, may take a generation to complete.

The scary aspect of all this is that there is just so much we don’t know.  There are more things that can go wrong, and every month there seem to emerge unforeseen financial problems.  Most of this stems from too much debt and leverage.  Brokerage firms in the 1970s were not allowed to have debt of more than 12 times equity capital.  These days a ratio of more than 30 is the norm.  Mortgage, consumer, hedge fund and almost every other type of debt have multiplied several-fold over the last decade or two.

It took a decade in the 1930s to adjust for the excesses of the 1920s and for the economic downturn to play out.  During the Depression, the government initially hiked taxes and pushed trade protectionism, aggravating the economic problems.  We are hearing those themes again during the current political campaigns.  In the early 1970s it took three years and an overall 50% stock market decline to adjust for the prior extremes.  I was on Wall Street during that period and lived through it.  This time it is worse, given the excesses in the late 1990s and more recently during 2004-’07.  So it could take more than three years to even out.

Even during normal periods the stock market incurs regular slumps.  From 1926-2007 the S&P 500 index dropped three out of every ten years.  During bear markets there are numerous false rallies of more than 5%, a dozen or so for example during the 2000-2002 bear market.

Despite this sobering scenario, you won’t hear your brokerage firm or major TV stock market shows dwelling on any of these issues.  They are cheerleaders and promoters.  Wall Street is always in denial, eternally optimistic with a systemic positive bias.  An automobile dealer sells cars.  Brokerage firms sell securities.  Both generate revenue from transactions.  The favorable bias is an inherent aspect of the businesses.

In my book, Full of Bull, I spend several chapters decoding the array of misleading and detrimental Street directives that are so counter to sound investment strategy:  Never take Wall Street literally.  Professional insiders know better.  The propaganda is evident in the nomenclature.  A falling market is a correction.  But a rising market is not termed a mistake.  Declining GDP or employment is called negative growth.  A recession is a contraction.

Stock investment ratings are similarly favorably skewed.  Even in today’s bad market there are less than 10% Sell ratings, more than 90% Buys or Neutrals.  Sometimes Outperform indicates a stock is expected to fall, just not quite as much as the other names in the sector.  An opinion shift from Buy to Neutral is a strong negative signal to unload the stock, in Street code.  Brokers rarely have the courage to use the gloomy “S” (Sell) word.  Earnings estimates are no different, almost always too optimistic.  In most cases, Street analysts take as their profit forecast the projection published by promotional, ebullient corporate executives.

Stock price targets, as published in research reports, are yet another overly positive bias.  How many times do you see downside, worst-case stock price possibilities highlighted in a report?  Never.  The Street is all about how much money you can make, the upside, not how much you might lose.

Wall Street is never focused on risk.  It is always about stock-price appreciation prospects, not about protecting capital, conservativeness — how much you might keep.  Even amidst a precipitous stock-price decline, such as in financials and home builders over the last 12 months, the Street focuses on “catching a falling safe,” that is, guessing the bottom for a purchase recommendation rather than avoidance.  Brokerage emphasis lists are all Buys, never Sell ideas.

No matter how negative the current market conditions or how uncertain the outlook, you cannot rely on Wall Street for objective advice on risk.   In view of the tens of billions of dollars in losses incurred by the Street with bad sub-prime loans and other debt instruments, it is hardly in a credible position to address risk.  Wall Street didn’t manage its own risk; don’t expect it to focus on yours.

©2008 Stephen T. McClellan, CFA

Stephen T. McClellan CFA, is a former Wall Street investment analyst with 32 years of experience covering high-tech stocks. He spent 18 years as First VP at Merrill Lynch and eight years as VP at Salomon Brothers. McClellan has ranked on the Institutional Investor All-American Research Team for 19 straight years and on the Wall Street Journal Poll for seven years. He is in the Journal’s Analysts Hall of Fame.

McClellan is former President of the Computer Industry Analyst Group and the Software/Services Analyst Group. He has been a guest on CBS, CNN, CNBC, and Wall $treet Week and has presented to many leading technology companies including IBM, Apple, ADP, and EDS. He is the author of the national best-seller The Coming Computer Industry Shakeout: Winners, Losers, and Survivors, and his work has also been published in The New York Times, Financial Times, Forbes, and other leading publications.

He holds an MBA in Finance from George Washington University and resides in San Francisco with his wife, Elizabeth Barlow, an artist.

McClellan’s website is stephenmcclellan.com

Ignorance is the enemy of liberty. That truth has never been so forcefully made as it has been with the rescue of the hundreds of children from the Fundamentalist Latter Day Saints compound in Eldorado, Texas.

As the clergy abuse crisis within the Roman Catholic Church has proved, Americans are all too willing to ignore evidence of child abuse when it occurs in the context of religious organizations. Until very recently, willed denial was the primary response to this devastating and systemic set of issues. Parents punished children who told them they had been sexually abused by priests, prosecutors declined to investigate, and newspapers failed to cover. Why? Because we as Americans just do not want to believe that religious groups are capable of such base behavior. As we succumb to the romanticism of religious liberty, we leave the vulnerable in desperate straits.

That is why the Supreme Court’s 1990 decision in Employment Div. v. Smith is both wise and necessary. In that case, the Court held that Native American Church members could not receive unemployment benefits if they used the illegal drug peyote, even if the drug was used during a church service. Why? Because “[o]ur cases do not, at their farthest reach, support the proposition that a stance of conscientious opposition relieves an objector from any colliding duty fixed by a democratic government.”

Some misguidedly criticized the decision, because it was purportedly based on “targeting” of the Native American Church. Religious and civil rights groups lobbied to enact the Religious Freedom Restoration Act to eliminate the Smith decision, because they argued that religious excuses should trump most “colliding” obligations. The children at risk in religious compounds prove how wrong they are.

The capture, trial, and conviction of Warren Jeffs, the prophet of the FLDS, along with books like Under the Banner of Heaven provided all the information anyone should need to know that the children within the FLDS are in extreme danger on a daily basis. Whether it is the adolescent girls being given to middle-aged men for sex or the boys being abandoned on street corners to keep the numbers in the men’s favor, leaving aside the poverty and educational neglect, this is an organization whose abuse bona fides have been clear for years. But the vast majority of Americans have simply ignored the evidence in their midst.

It is this willed ignorance that has kept these children in a religious cult that deprives them of basic liberty everyday. Now, the government is taking the right steps while the FLDS’s lawyers argue that their constitutional rights have been infringed. They argue they have a right to autonomy and treat the removal of women and children as though it is a massive constitutional invasion. To scare the courts, they argued yesterday that the raid on the compound was the equivalent of a raid on the Vatican. Given the Catholic Church’s problems with child sex abuse, this seems like an unfortunate comparison to make. In any event, even the Vatican would not be safe from authorities if hundreds of children were being abused on the premises.

Their constitutional arguments are just cover to deflect the public discussion away from the devastating conditions under which women and children have been living within the sect. In their arguments, liberty is an oxymoron. They hope that Americans will return to their daily lives, and simply set aside the knowledge they now have of the oppression of these children.

For children, ignorance combined with calls of religious autonomy are the handmaiden of tyranny.

Professor Marci Hamilton is a leading church/state expert who specializes on the issue of whether religious practices that violate the law should be accommodated. Professor Hamilton is a visiting professor at Princeton University this year and holds the Paul R. Verkuil Chair in Public Law at Benjamin N. Cardozo School of Law. She is the author of God vs. the Gavel: Religion and the Rule of Law (Cambridge 2005, 2007) and the forthcoming Justice Denied: What America Must Do to Protect Its Children (Cambridge 2008).
Hamilton represents numerous survivors of childhood sexual abuse, especially in circumstances where the abuse was made possible by religious organizations. Read her blog articles at: http://cupblog.wordpress.com/

We are a service economy. Close to 80% of our GDP is service based. In a marketplace wrought with problems and concerns over the economic downturn, one must wonder how we will pull ourselves out of this fiscal malaise, when our primary source of business results from how we service what others manufacture.
Never will service be a more considered factor in securing and maintaining business relationships. In these troubling times relationships will be tested, and I predict only those who have served customers and clients well, will survive well. With ferocious competition for limited client attention and business, how we serve will become a means to compare and judge.
Competitive differ entiation, which is lasting and enduring, will prevail in these turbulent times. We are seeing it already. Retailers and suppliers who have treated their customers and clients badly are feeling the pressure now. Business is falling off, and trying to change in the midst of an economic crisis may be a daunting challenge. People are being let go, locations closing and these two factors, connection and convenience, are at the center of any service strategy.
Those who have been paying attention to how they serve their customers and clients all along will get through these difficult times hurt, but perhaps not crippled.
Let’s explore this notion:
There are many great companies who come to mind as examples of how service has defined them. Four Seasons, Marriott, Charles Schwab, General Electric, Container Store, Wachovia, Southwest Airlines and Apple are just a few. These companies have used service as a bridge to loyalty and competitive differentiation. They place their customers first, train their associates on how to do that and make certain that their service culture is monitored for consistency in performance and reward, and recognize those who serve well.
Let’s focus on three companies who are benchmarks in Service Excellence in their competitive set and are recognized as such by those they serve:
The Ritz-Carlton consistently ranks at or near the top in guest satisfaction among luxury hotels.
eBay is one of the most trusted companies in the United States for customer privacy.
Saturns are consistently among the top-ranked value-priced cars for the car industry.
Each of these companies was among the first in their respective in dustries to identify service as a differentiator and set their corporate direction accordingly, and developed a Ser vice Excellence culture. As service pioneers in their fields, each of these companies were able to define the benchmarks against which service for that competitive set would be judged, further enhancing their competitive edge. This determination positions them well for an economic downturn.
There is another important point to recognize here as well; and certainly considering the dismal state of service in America, there is an opportunity to stand out even in these troubled times. Those who are the first to embrace a change by how they conduct their business are the ones who will achieve a competitive advantage in their fields—and it’s always preferable to be the first to the game, make the rules, and bring your own ball. Here is a great model to follow.
• FedEx Kinko’s •
They are a time tested example of the first-adopter theory in their competitive set. UPS and the Post Office were the significant factions in the package delivery business in 1971. Fred Smith formed FedEx in that year out of his frustration with the service he received when mailing packages. He determined that the time to deliver, lack of reliability, and methods used for shipping were unacceptable. He also realized that the business environment was changing so fast and assured delivery of packages was increasingly becoming an absolute requirement for businesses of all sizes. He was a visionary as much as he was a problem solver.
Thus FedEx became the first company in the package delivery industry to create a business plan based on understanding current customers’ needs, envisioning future needs, and developing an approach to satisfying needs and by reliably delivering packages to customers the very next day. (Reliability and speed) Furthermore, this was a breakthrough approach to both hard and soft needs of potential customers.
By how he did what he did, Smith changed an industry and defined the service benchmarks, and their competitors had no choice but to follow. The FedEx example illustrates an important approach to serv ing customers on understand ing client needs. I believe that the approach they developed considered that customers and clients had two distinct sets of needs; hard needs, satisfied by what he did, and soft needs satisfied by how he did what he planned to do. FedEx understood that, first; people need their mail, packages, and products to reach their destinations swiftly. In the FedEx op erating model design of overnight delivery, satisfying that need was, and is, a hallmark of their business. It is a need that is satisfied by what they do. That is the satisfying of a hard need.
However, FedEx went further and also understood that many people had a sec ond need that was perhaps even more significant. This was a need to feel confident, certain, and assured that packages would be de livered within the agreed-upon time frame. This need for worry-free delivery, which is really an emotional need, is satisfied by how they do what they do (a soft need.)
We believe that just about every relationship with those you serve is based on these two sets of needs: hard needs, which are satisfied by what you do, (FedEx will deliver your package by 10:00 tomorrow morning) and soft needs, those intangible, emo tion-based needs, which are satisfied by how you do what you do. (FedEx makes you feel certain that your package will arrive the next day, enabling you to be worry free once it’s in their hands)
In many instances today, due to the economy, the choices customers and clients make to balance things out are perhaps less concerned on what a product or service delivers and more drawn by how the experience makes them feel about how they are treated. Sadly the cost reductions associated with economic downturns compound the service dilemma. Embracing a service strategy in these times supports customer significance and gives them a reason to stand by you. These are great times to buck the tide and differentiate yourself by how you do what you do…
copyright Bob Livingston 2008
Bob Livingston formerly head of sales at Unilever’s The Lipton Company, is the founder and CEO of REL Communications, a consulting firm that moderates the Client Service Advisory boards. He also leads service-based cultural transformations within the companies with which he consults. His book, How you do…What you do is available from McGraw Hill.
www.mhprofessional.com/product.php?isbn=0071592784

Family Reunion

Making a full-scale motion picture like Prince Caspian is a journey unto itself — not only a physical one that took hundreds of filmmakers thousands of miles across two hemispheres, but also a spiritual and emotional voyage for the film’s family members.

With mothers and fathers, sisters and brothers, sons and daughters, and husbands and wives away from home for close to a full year, the film company’s 600-plus members bonded closely, sharing in both work and play, to create not only a friendly on-set environment over the lengthy seven-month shoot, but hopefully something greater than the sum of its parts — something all can hail proudly when the lights go down, the projector flickers, the film unspools, and their collective movie magic enchants audiences the world over.

As production began over a year ago on that mid-February morning in Auckland, there stood Andrew, the lanky director, alongside his Pevensie clan like a proud father with his children, home for the holidays. Even though it had been barely two years since the completion of The Lion, the Witch and the Wardrobe, his film family had, indeed, matured, both physically and emotionally. Their patriarch grinned with pride at the progress.

There they were, anticipating their forthcoming experience and joyously reliving the last one — Peter, Susan, Edmund, and Lucy, in the guises of actors William Moseley (now a dashing 20-year-old), Anna Popplewell (a newly minted Oxford freshman), Skandar Keynes (with vocal octaves much deeper at age 15), and Georgie Henley (approaching teenhood, a good six inches taller than we last saw her).

“They’ve all grown up really well,” Andrew beams about his young English cast. “It was nice to see them go back to a really normal life. They were excited about doing this again, and treated it like another adventure. There’s change in very positive ways about growing up, but I’d like to say the movie hadn’t changed who they are, which I’m really happy about. A lot of that’s attributed to their parents. They’ve all got great parents.”

“We’re a really tight unit . . . a formidable four, you could say,” quips Will, the eldest of the quartet. Adds Anna, “The dynamic among the four of us has pretty much remained constant, which is great. I know we’ll all still be friends after the movie finishes.”

“Do I feel like the leader of the group?” the handsome, fair-haired Moseley wonders when asked about the professional and personal dynamics of the four Pevensie actors. He responds proudly and without hesitation: “I definitely do!”

“Like I said before, I’m the oldest in my family,” he continues, “Anna is the oldest in hers, so she is also kind of the leader. Skandar is the youngest, but wants to be the elder as well. Georgie is the youngest as well. We form a very tight unit. The parallels to our characters are simple — we’re all playing ourselves, drawing on our own lives, to show how similar we are to these characters.”

While reflecting back to the beginning of the lengthy shoot, Anna was not surprised at the changes the cast experienced since they last worked together, over two years ago. Except, maybe about herself.

“What’s nice is everyone has grown up a little bit and changed a little bit,” she observes. “But, I’ve probably grown up the least, I’d say. Maybe that’s just because I haven’t noticed the change in myself.” To which Andrew smiles and replies, “Anna’s right. When I first met her, she was 13 going on 40. Now she’s 18 going on 40.”

Perry Moore’s wonderfully evocative book took us behind the scenes of The Lion, the Witch, and the Wardrobe, where we first met these four relative unknowns, memorably though Perry’s vivid and poetic portraits in each actor’s chapter. Let’s take a further peek at the lives of the four Pevensies, now older and (one hopes) wiser, as they venture from their own private worlds in England back to a magical landscape that has changed drastically since the first movie — much like the actors themselves!

Copyright © 2008 Disney Enterprises, Inc.

The above is an excerpt from the book The Chronicles of Narnia Prince Caspian
by Ernie Malik
Published by Harper One; April 2008;$19.95US/$21.50CAN; 978-0-06-143560-7
Copyright © 2008 Disney Enterprises, Inc.

Author
Ernie Malik was the unit publicist for both Narnia films and has worked in motion picture marketing for over two decades. Visit www.narnia.com for more information.

The story I’m about to tell you is true.

A few years ago I traveled to Baltimore, Maryland, for a speaking engagement. Anyone who travels for business knows that it is hardly glamorous. After 9/11, however, it became even more frustrating, and it keeps getting worse. I don’t think I’d be overstating it to say that business travel today is horrific: irretrievably lost luggage, annoying security searches, perpetually oversold flights, infuriating rental car policies, frazzled counter staff . . . I think you get the picture.

Despite all the traumas of travel, I decided a few years ago to always keep a smile on my face. The way I look at it: if the business travel industry gets the best of me, they win and I lose. I just can’t allow that to happen.

I keep a smile on my face by keeping my eye on a prize. My prize at the end of every business travel day is a vanilla milkshake . . . a thick, gooey, luscious, indulgent vanilla milkshake. I’m talking a hand-dipped, old-fashioned, malt-shoppy kind of milkshake. I don’t just like ’em; I love ’em. Both my career and my mental well-being literally depend on them. The image of that milkshake is the proverbial dangling carrot that gets me through even the worst travel day.

It had been a particularly difficult day of planes, trains, and automobiles. I was to arrive at the Baltimore/Washington International (BWI) Airport at 7:00 P.M . for dinner with my clients at 8:00 P.M . Unfortunately, I arrived at midnight. In other words, there was nothing out of the ordinary so far.

I grabbed my bags and stood in a long taxicab line to take the 20-minute ride to Baltimore’s beautiful Inner Harbor. I was cold, wet, tired, and hungry, but smiling, because I was going to get that vanilla milkshake.

When I finally got to my room an hour later the first thing I did was call room service where I was greeted by Stuart.

“Good evening, Mr. Little, this is Stuart in room service. How may I help you?” Stuart’s voice brimmed with enthusiasm.

“Stuart, I’d like a vanilla milkshake, please,” I said. A seemingly simple request, right? Well, not quite.

“I’m sorry, Mr. Little, but we don’t have milkshakes,” Stuart replied regretfully.

I was crushed. Quickly I regrouped.

“All right, Stuart, let me ask you this: Do you have any vanilla ice cream?”

“Yes, of course!” he responded with renewed enthusiasm.

“Okay, Stuart, I’d like a full bowl of vanilla ice cream.”

“Yes sir, right away, sir! Is there anything else I can do to serve you?” Stuart asked.

“Yeah . . . do you have any milk?”

“Yes, we have milk!” he replied confidently.

“All right, Stuart, here’s what I would like you to do. Please send up a tray with a full bowl of vanilla ice cream, half a glass of milk, and a long spoon. Could you do that for me, please?”

“Certainly, right away, sir,” Stuart responded triumphantly.

I hung up the phone and a few minutes later there was a knock. Sure enough, at my door there was a tray with a full bowl of vanilla ice cream, half a glass of milk, and a long spoon — everything needed to make a vanilla milkshake. But of course they didn’t have vanilla milkshakes.

Now let me ask you an important question. Is Stuart stupid? Or is the system stupid?

Stuart’s behavior is not unique. Like the vast majority of employees everywhere, Stuart wanted to do a good job. To this day, he probably still thinks he did.

Out of the 100 or so hotel rooms I stay in every year, I run this experiment approximately half the time. It’s not every night, as some hotels don’t offer room service, while others specifically offer milkshakes. I conduct this experiment only when a milkshake is not on the room service menu. More often than not, they do have all the ingredients to make me happy. Yet I usually end up with the same full bowl of ice cream, half a glass of milk, and a long spoon (some assembly required).

Why does this keep happening? Why can’t individuals like Stuart deliver what I asked for? I’ve had plenty of time to ponder that question now that I’ve received over 200 do-it-yourself vanilla milkshakes from America’s leading business hotels. Let’s take a look at some of the underlying causes that lead to these systemic breakdowns.

Stuart is standing at a point-of-sale screen popping in orders with his company-issued plastic access key. If his screen doesn’t say “milkshake,” then a milkshake simply does not exist. The supposedly foolproof system is designed to ensure that Stuart can’t make the organization appear foolish. Yet even a casual observer can see that the system has pushed the organization well beyond foolish. It is now sitting squarely in the land of lost opportunity. How’s that for irony?

Think about this. I represent the mother lode for the business travel industry. I stay in over 100 hotel rooms a year and I’m not exactly price sensitive. Stuart could have charged me $25 for that milkshake and I would have been happy to pay it.

I actually feel sorry for the major business hotel chains. In an effort to standardize their systems, they’ve taken individual judgment out of the equation. They spend billions of dollars in marketing to get people like me through their doors and billions more in staff training to make my brand of traveler happy. Yet they continually blow it, due in some part to a stupid point-of-sale system. But that’s just the tip of the proverbial iceberg. It goes much deeper than that.

Despite my feelings to the contrary that fateful night, Stuart’s inability to deliver a Milkshake Moment is not the end of the world. It is, however, symptomatic of a much broader organizational malaise.

This story is not just another example of bad customer service. It’s much more than that. This is a larger tale of lost opportunity. Invariably, the root cause can be traced back to factors that are much more fundamental. Peel back the bureaucratic layers of any organization and you will find a broad range of self-imposed limitations, from antiquated hiring practices to poor workspace design to short-term financial myopia.

Consider your organization. When are you saying no when it would be much better and just as easy to say yes? Are you really putting people in the best position to grow? Do your current policies, procedures, and systems enable you to truly deliver?

So what is a Milkshake Moment? It’s certainly not a full bowl of ice cream, half a glass of milk, and a long spoon. Instead, a Milkshake Moment is a brave individual action, be it big or small, that furthers the cause of growth in an organization. Milkshake Moments materialize when individuals understand the organization’s true purpose, honestly believe it is their job to fulfill it, and are given the tools and the freedom to make it happen. When a would-be growth leader managing deep within the bowels of a stagnating organization has the guts to stand up and say, “This idea is contrary to everything we say we believe,” that’s a Milkshake Moment. When a thinking person is given the freedom to seize an opportunity afforded by change, that’s a Milkshake Moment. When a small business owner consciously puts purpose before profit, that’s a Milkshake Moment. When the executive director of a nonprofit foundation challenges the status quo views of her tenured board members, that’s a Milkshake Moment.

Members of twenty-first-century organizations need to realize they are allowed to do the right thing — to serve the interests of others in order to grow the organization — instead of following arcane, arbitrary rules, processes, and procedures that actually hinder growth. Only when we remove our own self - imposed barriers can we seize new opportunities in structured settings. A Milkshake Moment can only be realized when growth leaders clearly communicate an organization’s true purpose and grant individuals permission to do whatever can be done ethically to achieve it.

But it takes guts to do this. Growth requires persevering, creative, even courageous individuals who aren’t afraid to mix it up. Are you ready?

© 2008 Steven S. Little

Author
Steven S. Little is a much sought-after expert on the subject of growth and the future of opportunity. A former President of three fast-growth companies, he now advises thousands of leaders of growing organizations and communities each year. To learn more about Steven and growth, please visit his Web site at www.stevenslittle.com.

As a parent, you are at the center of your child’s life, but first you are at the center of your life, and what your child needs more than anything is for you to be okay. Being OK will also improve your negotiations with your Ex over all issues.

There are a lot of things you can’t change, can’t control, so you have to play the hand you’ve been dealt. But the one thing you can do something about, the one thing you can control, is how you react to things that happen. From now on, what you do and what you say is entirely up to you — you are in charge! I want to help you learn about the things you can do and say that will greatly improve your chances for a better future sooner, and the health and well-being of your child. That’s what my life’s work is about — helping people get through divorce with a better outcome.

How you feel, who you are, what you do, choices you make, and how you act toward the other parent, these will all have a powerful impact on your child and on your own life from this day forward. As soon as possible, you need to turn away from whatever upsets you experienced and are now tangled in. Let it all become the past, not your future — it’s all old news and bad habits. Now it’s time to turn your attention to creating new habits, a better attitude, and a calm, strong, outward-looking center. Doing this will help you, your child, and will improve all your contacts and negotiations with your child’s other parent. It will greatly increase your chances for a peaceful settlement of all issues.

So, while you are struggling to deal with events in your daily life, high up at the top of your list of priorities is your determination to find a new center in a new life, to create calmness, strength and optimism at your core. While life swirls on, you keep this constantly in mind and you become patient because you know you are on a journey of a thousand small steps. Whenever you wander off course, or get blown off, fuhgedaboudit! Pick yourself up and put yourself back on course to how you want to be.

If you’re like most people and finding this to be a very trying time, I’d like you to read Tips for getting through a tough time right now.

The other parent

You can’t control your Ex but you can control how you act and react toward your child’s other parent. You have to keep in mind that your Ex also faces fears and challenges. Above all, you must know that his/her state of mind is extremely important to you for two reasons: (1) this is your child’s other parent and your child needs both parents to get centered and settled so they can give the child a feeling of well-being on both sides, and (2) you can’t negotiate terms or work on parenting arrangements when either of you are fearful, angry or upset. You need to help calm one another’s fears and spread reassurance that financial and parenting arrangements can and will be worked out. Ideally, you will make temporary arrangements for support and parenting that will get you through for a while until you can reach a final agreement. The important thing is to try everything you can do on your own before you hire an attorney to go to court for custody and visitation orders, because that is certain to get you into a very nasty and very expensive legal battle that will surely damage your child, both parents and all chances for future co-parenting. If nothing else works, ask your Ex to join you, for the sake of your child, in mediation just on temporary arrangements. Meanwhile, keep plugging away at things you know you can accomplish, doing things you know you can control.

Things you can control

You can’t control the other parent, but you can control how you react to things the other parent says and does. Remember, “If a dog bites you once, shame on the dog; but if the dog bites you twice, shame on you.” How long, how often, are you going to let your Ex push your buttons, get you riled, make you feel bad? People are more complicated than dogs, so it takes more than two or three bites and it’s especially difficult when you are interacting regularly about your child, but at some point you have to take responsibility for your own part in cycles that play and replay over and over. At some point, it’s up to you to rise above it and find some way to change how you react to the same old triggers. Yes, it’s best if the other parent is doing the same thing, but remember … you can’t control that. Focus on what you can control — you. Parenting is emotional deep water, but for the sake of your child and yourself, you need to turn the boat and start rowing toward a friendly shore and a more useful way of looking at things.

The first part of the equation, the first place to start, it’s all about you and the things you, and only you, can do to make things better.

Parting thoughts. Unless you have an emergency, don’t go to an attorney until you first get organized and prepared, figure out what you want from the attorney, and particularly what attorney to go to. Don’t talk to your Ex about divorce or parenting until you learn how to reduce upset and lay the groundwork for successful negotiation.

© 2008 Ed Sherman and Nolo Press Occidental

Author
Ed Sherman is a family law attorney, divorce expert, and founder of Nolo Press. He started the self-help law movement in 1971 when he published the first edition of How to Do Your Own Divorce, and founded the paralegal industry in 1973. With more than a million books sold, Ed has saved the public billions of dollars in legal fees while making divorce go more smoothly and easily for millions of readers. His latest book, Make Any Divorce Better, does exactly what the title says. You can order his books from www.nolodivorce.com or by calling (800) 464-5502.

l. Get a facilitator. This is the traffic cop of the session, and should be an outsider. An insider brings baggage that can inhibit the free flow of ideas. HR consulting organizations are one possible resource; if you are working with a design firm like IDEO or Continuum, they may be able to help. If bringing in an outsider is difficult for some reason, the second best option is to bring in someone from a different group inside the company. Facilitators need to be skilled at group dynamics, able to read when the team is flagging or when it is hitting on all cylinders. They have to be patient, yet willing to exercise discipline if one person can’t stop talking or is becoming aggressive. It is more a matter of personality than formal training, but it can’t hurt to bring in people to watch a well-run brainstorming session to see how it works.

2. Be prepared. The Boy Scouts have it right. Preparation is a key to success. In terms of brainstorming, this means two things. First, the topic needs to be well understood. Balance is required here. The subject needs to be specific enough for good answers to be possible (a session on the theme of “new ideas for cleaning” is going to be deadly) and general enough to provide room for creativity (”industrial abrasives for stainless steel sinks” is not going to get anyone excited). What could work: Well, IDEO did a useful session with P&G on “how to reinvent bathroom cleaning.” The topic needs to be defined in terms of either the market or of consumer needs and habits; all the participants need to know what it is, and also have a little time to think about it. You want them to bring something to the party; this can be the glimmering of an idea, a competitor’s product, a color pattern, a series of useful words or images, or an interesting question. Something — anything — to get to the launch pad.

3. Relax. Fear blocks both the generation and expression of ideas. Not every company or team will be comfortable with this, but consider doing some kind of word game or ice-breaking exercise to loosen people up (e.g., the improv circles at Clay Street). Discourage negative comments; as the session goes on, it is going to become apparent which ideas have any kind of future — bad ones do not have to be shot down on sight. At Clay Street, the buzzwords are “Yes, and . . . ” Not “Yes, but . . . ” Trust is the word here; people need to believe that they can say what they think without the risk of being ridiculed.

4. Leaders should follow. The whole idea of a brainstorming session is that it be open and freewheeling. But everyone at the table is going to be aware of who else is there, and where each person sits in the corporate hierarchy. There is going to be the usual human desire to please one’s superiors. Consciously or not, some people some of the time will try to do so by agreeing up the ladder. So leaders should be careful about when and how they talk. General Peter Pace, former chairman of the Joint Chiefs of Staff, says when he wants to get an honest opinion, he asks a question neutrally and then gives his opinion last. If he gives his thoughts first, that colors the entire discussion. The whole point of brainstorming is that everyone participates, so we are not suggesting that leaders simply shut up; but they should think carefully about how they join in. Don’t close down discussion; don’t be the first to weigh in on everything; do tap into other people’s ideas; ask questions.

5. Get everyone to contribute. This should be obvious, but group dynamics are such that it does not always happen. And it won’t if people are intimidated or the tone is brutal (see rules 2 and 3). The wrong way to get everyone involved is to go around the table or to single people out — that can be scary. The right way is for the facilitator to know why each person has been selected to be in the room and try to play to each individual’s expertise. Discourage interruptions; not only can this be rude, but it can silence those who lack the personal style to persevere through them.

6. Keep track of ideas. Obvious, but essential. Use a whiteboard or a big sheet of paper so that everyone can see what has been said and make connections between ideas. Allow people to write down their own ideas; it lets them refine them as they go along and also gets them out of their chairs, which can be rejuvenating. Discourage taking notes. If necessary, tape and transcribe meetings; or bring in someone to do so. If people have their head down writing what has just happened, their mind is not in the moment. Number new ideas as they occur for easy reference; this also builds a sense of accomplishment as the number accumulates, or as incentive for action, if it doesn’t. Quantity matters in brainstorming.

7. Think ahead. Done right, brainstorming can be fun, sort of like a college bull session, but with full pay. Of course, that is not the point. Brainstorming is supposed to be a start of something, not an end in itself. At the end of the meeting, the participants should figure out what to do next to refine the insights generated. Brainstorming is itself a kind of Connect and Develop; generate ideas, then connect them, and repeat. This is not the time for considering practicalities, but for simply exploring ideas on a conceptual basis.

8. Use props. One of the reasons for rule 6 is that some people think visually; putting stuff up for them to see is a way to engage their mind. Others think best with their hands. So bring in prototypes of related things, versions of current (or competitive) products, even just bits and pieces that seem relevant — a color wheel, say, or advertisements, or a deconstruction of what you are talking about. Anything to get people thinking in practical terms about what you want to achieve. And again, this helps to keep them awake and interested. IDEO brings things like foam, duct tape, glue, straws, and markers to make models or just get the physical juices stirring.

9. Go outside the lines. Consider the metaphor contained within the word brainstorm. A storm is wild, volatile, and often random; it is weather with a passion. But it also has a beginning and an end. A good brainstorm should be something like that; without a degree of impulsiveness, of something very like whimsy, it will end up as a puddle, not a storm. And that is a waste of time. So let people stray into odd territory and let others follow; this just may lead in the direction most likely to get you to the ultimate destination. The facilitator needs to have the judgment, though, to reel people in if they are too far gone or go on for too long.

10. Follow the rules. From the outside, a brainstorming session may look chaotic; in fact, it has its own discipline. If this is not adhered to, people might have fun, but they will not produce ideas worthy of their time.

The above is an excerpt from the book The Game Changer
by A.G. Lafley and Ram Charan
Published by Crown Business; April 2008;$27.50US/$32.00CAN; 978-0-307-38173-6
Copyright © 2008 A.G. Lafley and Ram Charan

Author Bio
A.G. Lafley is the chairman and CEO of P&G, which is consistently recognized as one of the most admired companies in the world and a great developer of business leaders. A.G. was named CEO of the year in 2006 by Chief Executive magazine and serves on the boards of GE and Dell. His first opportunity to manage a business came when he was in the Navy and in charge of retail and services businesses for ten thousand Navy and Marine Corps people and their families. After the Navy he went to Harvard Business School, and then joined P&G following graduation. He started as a brand assistant for Joy in 1977 and was appointed CEO in June of 2000.

Ram Charan is the coauthor of the bestseller Execution and the author of What the CEO Wans You to Know, Know-How, and many other books. Dr. Charan grew up in India, where he first learned the art and science of business in his family’s shoe shop. After earning his M.B.A. and D.B.A. from Harvard Business School, he taught for a number of years at both Harvard and Northwestern. He now advises the leaders and boards of companies around the world, including GE, DuPont, Nokia, Verizon, and the Thomson Corporation. What people around the world proclaim are Ram’s practicality and the value he provides in helping them solve business problems. For more information on Ram Charan and his work, visit www.ram-charan.com.

Mindfulness is being aware of yourself, others, and your surroundings in the moment. Well-known mindfulness teacher, Jon Kabat-Zinn, defines it this way Mindfulness means paying attention in a particular way; on purpose, in the present moment, and nonjudgmentally. I also like to think of mindfulness as the art of inhabiting your own life with kindness and acceptance.

When first entertaining the idea of practicing mindfulness in a conscious, committed way, I had mixed feelings. On the one hand, I absolutely believed that I would love the peace of mind and sense of balance that those who practiced mindfulness seemed to enjoy. On the other hand, I groaned inwardly at the thought of adding yet another guilt-inducing “should” to an already full schedule. Two different things tempered my concerns and helped me make a wholehearted commitment to the practice of mindfulness. One was noticing how calm, accepting, and humorous people were whom I knew practiced mindfulness regularly. I wanted more of that appealing equanimity and joy. The other realization was a semi-embarrassing “Duh!” Instead of making mindfulness a guilt-inducing chore, I could simply choose to make practicing mindfulness a joy and celebrate each small step taken.

Because my goal in personal practice is to create a guilt-free and supportive atmosphere, I’ve adopted the adage A few mindful moments make a world of difference as my motto. And a few mindful moments do make a world of difference. Probably, we can all summon memories of experiences that are branded indelibly in our minds and hearts. They may be as simple as watching the moon rise or as miraculous as being at a baby’s birth. Remembering such things can feel as if we’re having the experience all over again. We can actually embody the same physical feelings, or the deep sense of awe and mystery, that were present at the actual event. But why do these particular memories stick with us in such vivid detail while so many others fade into oblivion? What do these indelible memories have in common? We paid attention when the original events were happening. Our brains, hearts, and minds where present during the experience, not projected into the future or ruminating in the past. We were there, alive and receptive, fully inhabiting our lives in that moment.

As parents, anyone who has been in an intimate relationship, and even animal trainers know, you get more cooperation and a better response from others by accentuating and appreciating acceptable behaviors than you do by emphasizing and berating undesirable ones. In other words, we catch more bees by using the honey of kindness and approval than we do by wielding the bludgeon of guilt. The same is true of your relationship with yourself. Energy and enthusiasm flow where your attention goes. Therefore, in keeping with my guilt-free motto, I try not to dwell on how few mindful minutes I may have had so far today; but, rather, gently remind myself to become more mindful right now. It can also be helpful to revisit mindful moments at the end of the day and congratulate yourself on your expanding awareness. Affirming even what may seem the smallest of successes encourages you to continue practicing mindfulness one tiny little moment at a time.

The following practice helps me begin and end the day with a few mindful moments.

Practice . . .

Wake up to breath . . .
Before getting out of bed in the morning, tune into your breath and simply be aware of it without trying to change it. Do this for five or six breaths.
Express gratitude for at least two things. For instance, waking up to another day, sleeping as well as you did, or for a dream you remember.
Set an intention for the day. For example, “Today I will practice kindness.” “Today, I will eat in a healthy way.” or “I will give each of the kids five minutes of undivided attention today.”
Rest in breath . . .
Before going to sleep at night, turn your attention to your breath. Rest in it quietly for several effortless inhalations and exhalations.
Review and relive mindful moments experienced during the day. Thank yourself for being aware and present. Think about constructive choices you made and congratulate yourself for making them.
Ask to be protected as you sleep.
Each mindful moment remembered and celebrated makes a world of difference in our willingness to continue practicing.

Well-known mindfulness teacher, Pema Chodron says, Compassion for others begins with kindness to ourselves. One of the wonderful things about adopting a guilt- free attitude toward our mindfulness practices in particular, and ourselves in general, is that our personal outlooks are effected. When not carrying a self-induced burden of guilt, our hearts can open more fully and, as a result, shower compassion and kindness on both ourselves and others.

Practice mindfulness
With commitment, not pressure
Feel heart opening.

Copyright © 2008 Sue Patton Thoele

Author
Sue Patton Thoele is a psychotherapist, former hospice chaplain, and bereavement group leader. She is author of eleven other books, including The Courage To Be Yourself, The Woman’s Book of Soul, Growing Hope, Freedoms After 50, and The Woman’s Book of Courage. Sue and her husband, Gene, live in Colorado near their adult children and grandchildren.

For more information, please visit www.suepattonthoele.com

Americans are deeply unhappy with the country’s health care programs and costs. And rightly so. As one author observed, “A recent survey showed that only 17 percent of respondents in the United States were content with their health-care system . . . Why the discontent? The superficial reasons are simple enough to describe: the system is hugely expensive, very bureaucratic, and extremely patchy. The expenses first: U.S. health care costs a third more, per person, than that of the closest rival, superrich Switzerland, and twice what many European countries spend. The United States government alone spends more per person than the combination of public and private expenditure in Britain, despite the fact that the British government provides free health care for all residents.”

The United States pays more for health care per capita than any other industrialized nation — and even then, Medicare is not a comprehensive, pay-for-everything national health program like those of many nations and United States per capita health care costs continue to escalate rapidly.

Here’s what you need to know about health care costs as you plan for retirement.

Americans age sixty-five and over spend four times more on health care on average than do Americans under the age of sixty-five. At the outset of this decade, the average per capita health-care outlay for a person under the age of sixty-file was about $2,800. For people over the age of sixty-five, it was $11,089. And for Americans ages eighty-five and older it was $20,001. Clearly, health care outlays are likely to get substantially larger as you age. You need to plan for them.

U.S. health care expenses have grown mightily. U.S. health care expenses have dramatically escalated each year as new medications, new treatments, diagnostic tools, and health care innovations have come onto the market.

For example, the median nationwide cost for a hospital stay — excluding physicians charges — was $11,280 in 1997; by 2004 it was almost double at $20,455. The average total cost for treating a heart attack climbed 40 percent in just seven years. All in, health care costs have escalated fast and the increases are gaining momentum.

Health care costs are likely to continue to grow unabated. Unlike in other countries, no laws meaningfully curb the continual climb of health care and drug costs in the United States. For example, many Americans continue to import drugs from Canada because Canadian prices are significantly lower. This is true even though the new Medicare Features introduced in 2006 offset the cost of pharmaceuticals for U.S. retirees. To curb the cost of medicines, Canada prohibits drug companies from advertising on its television channels. In the United States, on the other hand, the very legislation that created the new Medicare drug benefit (Part D) expressly prohibits the federal government from attempting to negotiate lower prices with drug companies.

Count on it: medical costs are sky-high and likely to keep climbing unless there is a radical overhaul of the system.

More and more corporations are cutting back on health care benefits as medical costs soar. Recent statistics show companies cutting health care benefits and requiring employees and retirees to pay more for them. As one survey of corporate benefit trends concluded, “[Benefit] reductions have become not just common, but expected, with the only question now being of how much more of a reduction in benefits and or an increase in cost will be directly placed on individuals . . . In the end . . . individuals, either as taxpayers or consumers, will need to pay the bill.

I believe this trend will gain greater momentum over the next decades. It will be part and parcel of the continuing erosion of employment benefits — like the demise of traditional pensions — that is taking place throughout the country. Just like pensions, more and more health-care expense is going to become a do-it-yourself responsibility because heath care insurance costs are simply becoming too great for companies to shoulder competitively.

Taken all together, you can count on: (1) higher and higher health care costs, (2) more health-care-benefit cutbacks by U.S. employers, (3) the need to factor large health-care expenses into your funding plans, and (4) the need to buy supplemental health-care insurance to shield your savings from cost attack.

Of course, these views will not come as a surprise to most folks. Recent polls show that — immediately after the foremost financial concern of having enough money for retirement — the next great concern of most Americans is health care. More than half of adult Americans are “very worried” or “moderately worried” about being able to pay for serious illness or catastrophic health-care expense.

Copyright © 2008 by Jim Schlagheck

The above is an excerpt from the book Cash-Rich Retirement
by Jim Schlagheck
Published by St. Martin’s Press; March 2008;$24.95US/$31.00CAN; 978-0-312-37740-3
Copyright © 2008 by Jim Schlagheck

Author
Jim Schlagheck is an author, banker, longtime advisor to the ultrawealthy, and the coproducer of the public television series Retirement Revolution. He has written numerous articles on investing, retirement, and finance, and is also an acclaimed speaker who describes better ways for retirement readiness to audiences of wealth-management professionals and lay investors nationwide.