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Archive for the 'Business' Category

Thursday, July 3rd, 2014

The Value of Moats

The Nature of Value

“The investor’s job is to make a judgment about intrinsic value based on faith in the underlying capabilities to maintain the moat relative to the cluster and economy on a go-forward basis.” — Nick Gogerty

This week our featured book is The Nature of Value: How to Invest in the Adaptive Economy, by Nick Gogerty. In today’s excerpt from The Nature of Value, Gogerty explains the concept of “moats,” and argues that identifying a moat is an extremely lucrative pursuit for any business.

Don’t forget to enter our book giveaway for The Nature of Value by 1 PM Monday, July 7th!

Wednesday, July 2nd, 2014

The Nature of Value, as Illustrated Through Pins

The Nature of Value

This week our featured book is The Nature of Value: How to Invest in the Adaptive Economy, by Nick Gogerty.

Last month, we pinned many of the most profound illustrations from the book on CUP’s Pinterest profile.
As one can see below, Gogerty takes a completely original approach to explaining the relationship between intrinsic value and price. As the intrinsic value of a golden-egg-laying goose may not be obvious at a quick glance, neither is the value of a firm’s unique capabilities. View the full The Nature of Value board here.









Throughout the week, we will be featuring content about the book and its author on our blog as well as on our CBSP Twitter feed.
Don’t forget to enter our book giveaway for The Nature of Value by 1 PM Monday, July 7th!
Additionally, you can read an excerpt from the first chapter here.

Tuesday, July 1st, 2014

A Glimpse into The Nature of Value, by Nick Gogerty

The Nature of Value

This week our featured book is The Nature of Value: How to Invest in the Adaptive Economy, by Nick Gogerty. Today, we are happy to present an excerpt from the first chapter of The Nature of Value, “The Problem with Price? It’s Not Value,” in which Gogerty illustrates the concept of intrinsic value as a golden-egg-laying goose. After seeing these original graphics, you won’t be able to confuse “price” for “value” again!

Throughout the week, we will be featuring content about the book and its author on our blog as well as on our CBSP Twitter feed.
Don’t forget to enter our book giveaway for The Nature of Value by 1 PM Monday, July 7th!

Monday, June 30th, 2014

Book Giveaway! The Nature of Value, by Nick Gogerty

The Nature of Value

This week our featured book is The Nature of Value: How to Invest in the Adaptive Economy, by Nick Gogerty. Throughout the week, we will be featuring content about the book and its author on our blog as well as on our CBSP Twitter feed.

The Nature of Value explores the function of economic value in the context of evolution’s processes to explain how investors can improve their allocation decisions. View the book trailer here:

We are also offering a FREE copy of The Nature of Value. To enter our book giveaway, simply fill out the form below with your name and preferred mailing address. We will randomly select our winners on Monday, July 7th at 1:00 pm. Good luck, and spread the word!

Wednesday, June 18th, 2014

A Conversation With Leslie Pratch, Author of LOOKS GOOD ON PAPER?

Leslie Pratch

“Effective leaders are likely to act with consistently high integrity and to demonstrate sound, timely judgement when they occupy positions of power…. But every executive is unique … the most striking differences … are in their underlying motivations and their coping tendencies.”–Leslie Pratch

The following is an interview with Leslie Pratch, author of Looks Good on Paper: Using In-Depth Personality Assessment to Predict Leadership Performance

Q: How did you first become involved in the role you play for companies now—evaluating candidates for leadership positions?

A: I have been evaluating candidates for leadership positions for more than 15 years. But I didn’t get to this spot by accident; creating the tools and building the capability to do this was something I pursued for many years across multiple universities and graduate degrees.

First, I was a graduate student in psychology. As a graduate student, I had the chance to help set up a talent program for high potential professionals at Arthur Andersen. For my Ph.D. dissertation, I researched if it were possible to predict the emergence of leaders in a high performing group, using a psychological approach I was developing. It turned out that it was possible. After graduate school, I worked with State Farm on the development of a competency framework for their whole organization. That led me to the development of my own competency framework, which I use in my work today with my clients. I also got an MBA, after I had begun evaluating executives, to give me better tools to understand the issues my clients and their candidates face.

Q: How does holding an MBA help you in your work?

A: Having a strong understanding of business allows me to understand at a sophisticated level what my clients are trying to do with their companies and investments. I can understand and think critically about the investment thesis, understand the strategy of the firm, and see the implications of all of that for the job that will be ahead for the candidates I’m evaluating. Having a strong understanding of business lets me be a business discussion partner as well as a skilled psychologist.

Q: Why do you continue to track candidates for months and years after they have secured the position they were being considered for?

A: These are long-term jobs. The usual investment horizon for my clients is three-to-five years, and most public company boards give top managers some time before deciding whether a new CEO is a success (with rare, glaring exceptions when someone is clearly failing). Since I am not predicting how a candidate will perform on a specific task, but rather how the candidate will handle the complex job of leading an organization over time, we have to let time pass to see what happens. (more…)

Friday, June 6th, 2014

Will New York City Remain the Capital of Capital?

Capital of Capital

“Ultimately, the question asked today is the same one raised in the 1790s, the 1830s, the 1890s, the 1910s, and the 1930s: how can the city and the nation balance their own needs with those of a banking system that they cannot afford to be without?”—from Capital of Capital

As noted in Capital of Capital: Money, Banking, and Power in New York City, 1784-2012, according to the Z/Yen Group’s Global Financial Centres Index, New York City has slipped from its top position as the leading financial center, replaced by London. Here are the top 10 cities:

1. London
2. New York City
3. Hong Kong
4. Singapore
5. Tokyo
6. Zurich
7. Chicago
8. Shanghai
9. Seoul
10. Toronto

Will New York City reclaim its top position or slip further down as emerging economies become even bigger players in the global economy? In the conclusion to Capital of Capital, authors Lautin and Jaffe explore the challenges faced by New York City as the Capital of Capital as well as the city’s resiliency as a leading financial center:

If, despite traumas and changes, New York City endured as the nation’s financial headquarters, its identity as the world’s banking hub, a role it had played for decades, faced serious challenges in the new century. In the early 2000s, even before the meltdown, the city seemed to be losing out to global financial centers like Hong Kong, Singapore, and London. Press stories pointed to startling statistics: in 2007, less than 15 percent of the world’s new initial public offerings of stock shares were brought to market on one of the New York exchanges. As recently as the 1990s, that figure had topped 74 percent. And even though today most of the world’s biggest banks are located in Europe (the largest American bank, JPMorgan Chase, was number nine on that list in 2012), by 2050 the emerging economies of the developing world are expected to overtake the industrialized nations.

(more…)

Thursday, June 5th, 2014

Images from Capital of Capital: Money, Banking, and Power in New York City

Capital of Capital

The following are some examples of the extraordinary images and historical documents from Capital of Capital: Money, Banking, and Power in New York City, 1784-2012, by Steven H. Jaffe and Jessica Lautin:

New York One-Cent Note
New Yorkers were familiar with paper money before the founding of the Bank of New-York in 1784. In the early republic, the issuing of paper money would become the province of private, state-chartered banks such as the Bank of New-York. City governments and even private businesses also issued notes in payment to employees or vendors.

Greenback
Recognizing that the Northern economy needed a more ample and liquid money supply in order to win the war, Secretary of Treasury Samuel Chase resorted to a radical new plan in 1862 and 1863. The secretary now pressed Congress to authorize the Treasury to issue a new paper currency “bearing a common impression.” These greenbacks as they became known , would enter the economy as the government paid soldiers, sailors, and war contractors with them; as banks made loans and cashed checks for customers; and as citizens exchanged notes from state banks for the federal money.

Women's Banking
The divided spaces of Beaux-Arts banks reflected the diversified operations and activities of Gilded Age banking. Clerks, tellers, and cashiers were separated from the public by elaborate brass grillwork, and female customers were segregated. Responding to the fast-growing population of women depositors while adhering to Victorian gender norms, banks provided women with their own teller windows and maid service.

Depression
Albert Potter evoked the despair of the depression years in New York with the figure of a beggar; Death hovers above.

(more…)

Wednesday, June 4th, 2014

New York City as the Capital of Capital — Steven Jaffe and Jessica Lautin on The Brian Lehrer Show

Today, we offer another interview with the authors of Capital of Capital: Money, Banking, and Power in New York City, 1784-2012.

Steven H. Jaffe and Jessica Lautin recently appeared on The Brian Lehrer Show to discuss the book and the frequently contentious history of banks in New York City. Among other issues, Jaffe and Lautin discussed why New York City became the “capital of capital,” surpassing Philadelphia and other cities; how New York City became not only the center of banking but also the center of protests against capitalism from the union movement to Occupy Wall Street; how immigration gave rise to savings banks; and whether or not New York City will remain the “capital of capital”

Tuesday, June 3rd, 2014

Interview with Jessica Lautin, Co-Author of Capital of Capital

Capital of Capital “Banks are not a monolith; and their functions have been extraordinarily diverse—worthy of both ire and praise.”—Jessica Lautin

The following is an interview with Jessica Lautin, co-author of Capital of Capital: Money, Banking, and Power in New York City, 1784-2012

Question: What is Capital of Capital about?

Jessica Lautin: Capital of Capital examines how New York’s banks became central first to the city’s, then the nation’s, and ultimately the world’s economy. And it’s about the symbiotic relationship between the development of New York’s banks and the city itself.

Q: Why is it important?

JL: You can’t understand the growth of New York City without understanding the growth of its banks. There are excellent books and articles out there on specific periods in this great narrative—on Alexander Hamilton, the Gilded Age, the Depression, the fiscal crisis, and of course the Great Recession. But this book is the first to cover the full sweep. By looking at this long history you can see certain themes, trends and topics emerge: the cycles of booms and busts; the denial of and access to credit; the relationship between New York’s banks and government; the creation by New York’s banks of new financial instruments and strategies; and banks’ investment in the infrastructure of the city.

Q: The exhibition that preceded the book was on view at the Museum of the City of New York in 2012. Why did the City Museum decide to cover this topic at this time?

JL: Citigroup was interested in sponsoring an exhibition about the history of banking in Gotham to honor the 200th anniversary of the founding of the City Bank of New York in 1812. This idea dovetailed perfectly with the Museum’s mission to connect New York City’s past, present, and future. We began planning this exhibition when the city and nation were still reeling from the financial crisis and the Occupy Wall Street movement had just made the news. Everything was still so fresh that we wondered if the opening of the exhibition might even draw protestors. (It didn’t). All of the headlines echoed those that appeared in the 18th, 19th and 20th centuries: outrage at the city’s banks and attacks on its wealthiest citizens; calls for tighter regulation; announcements of new forms of currency; concerns about banks leaving town. We covered this history in the exhibition while also leaving visitors with a question about the future: Would New York City continue to be the capital of global finance? Newly generated and designed infographics in the last section (that also appear in the book) helped visitors to come up with an answer—graphics on such topics as: banks and the labor force; assets of commercial banks; and loans by foreign bank branches. Then there was an opportunity to register an answer in a survey programmed on old ATMs.

Q: Banks today and throughout NYC’s history have been the frequent targets of criticism. How fair is this?

JL: It’s true that banks have been the target of vitriol since their founding. Like the Occupy Wall Street protestors, John Adams attacked them as corrupt and elitist, calling bankers “swindlers and thieves.” It makes sense, and yes, it’s fair, that Americans have always been suspicious of the institutions that pool, grow and distribute money and credit. There are many instances throughout the nearly 230 years when banks have willfully ignored excessive risk to themselves and their customers in the interest of profit. If in 2008 it was the packaging and selling of subprime mortgages, in 1857 it was speculation in railroad securities. Also, before legislation forced banks to change their lending and hiring policies in the 1960s, ‘70s and ‘80s, many banks systematically denied employment and credit to African Americans, women, gays and lesbians. And this denial of credit had profound and lasting effects, for example, on the segregation of neighborhoods. By subsidizing the building of single-family homes for whites in the suburbs while refusing home loans to blacks and Hispanics in poorer neighborhoods, banks perpetuated poverty and racism.

(more…)

Thursday, May 1st, 2014

Dean Starkman on Financial Journalism and the Disappearance of Investigative Reporting

Dean Starkman, author of The Watchdog That Didn’t Bark: The Financial Crisis and the Disappearance of Investigative Journalism, was recently interviewed on All Things Considered on changing trends in news and what it might mean for the future of journalism.

Starkman argues that despite the amount of data now available to journalists and readers, stories are still being missed. While some smaller news outlets did spot and focus on shifts in financial markets, many of the major financial news organizations either ignored it. Rather than investing in investigative reporting, they were only listening to insiders with a vested interest in not shedding light on problems in the financial markets. Here’s an excerpt from his interview:

When you think about the financial crisis, it wasn’t like there was an absence of data. These are reporters working on the streets of Roanoke and the streets of Pittsburgh. This story was something that had to be reported from the bottom up. The quality of these transactions under which these mortgages were made, that was only gettable through basically ground-up reporting, talking to people who were outside the system.

Starkman also recently appeared on Yahoo! Finance to discuss The Watchdog That Didn’t Bark: (more…)

Thursday, April 10th, 2014

Video: Interview with Michael Yogg, author of Passion for Reality: The Extraordinary Life of the Investing Pioneer Paul Cabot

The following is an interview with Michael Yogg author of Passion for Reality: The Extraordinary Life of the Investing Pioneer Paul Cabot.

The interview is with Glyn Holton, who writes the following:

Today, I interview Michael Yogg, author of the new book Passion for Reality. Its about Paul Cabot, a pioneer of the mutual fund industry. In 1920s Boston, Cabot cofounded State Street Investment Corporation, one of the first open-ended mutual funds. He shepherded the fund through frenzied markets, the crash of 1929 and into the Great Depression. As Washington turned to investigating and then regulating the fledgling mutual fund industry, Cabot played a central role. The book does more than tell Cabot’s story. It gives us a front-row seat on the emergence of this important industry.

Friday, February 14th, 2014

Moralism and the Facts — The Pillars of Paul Cabot’s Investment Strategy

Passion for Reality, Michael YoggWe conclude our week-long feature on Passion for Reality: The Extraordinary Life of the Investing Pioneer Paul Cabot, with an excerpt from the epilogue. In these excerpts, Yogg considers some of the core values that shaped Cabot’s investment strategy and what it might mean for today’s investors:

Two modes of thought shaped Paul Cabot’s approach to investments and the conduct of his business: moralism, inherited largely from his fam­ily and the culture of Boston; and empiricism, a demand for the facts, a trait he was probably born with but which was reinforced by his education and his experience in the stock market. He was not unique in this, but Paul also had the self-confidence and the passion to challenge the prevailing business culture and move to change it.

When confronted with wrongdoing, Paul often displayed the mindset of a Massachusetts Puritan of an earlier era, even though his lifestyle was far from puritanical and he was not overly religious. When he discovered price manipulation of trust shares, he gave a speech that sounded in parts like a jeremiad. When the perpetrators tried to have him silenced, he “flamed up. (He) got so goddamn mad.” It was truly righteous anger. Echoing the early Puritans, he believed that if sinners were tolerated, they would—at least figuratively—bring God’s wrath down on the entire com­munity. Referring to the abuses of the British trusts of the nineteenth century, he declared in 1928 that “unless we avoid these and other errors and false principles we shall inevitably go through a similar period of disaster and disgrace. If such a period should come, the well run trusts would suffer with the bad as they did in England forty years ago.”

Most of the specific abuses that Paul objected to—price manipulation, dumping unwanted securities into mutual fund portfolios, unnecessarily complicated and deliberately confusing capital structures—were breaches of fiduciary duty, instances in which a manager put his own interests above those of the client. Takeovers in which a financially-driven conglomerate took over businesses it did not fully understand were another concern. There was a sense in New England and elsewhere, both before and during Paul’s day, that people should stick to their business, do what they do best, and not buy something merely because the acquisition would increase reported profits. He compared the takeovers of the 1960s to various past financial scandals, “all born of greed and lust for power.”

Paul’s lack of greed complemented his moralism. He was known for his frugality and even ridiculed for it. While writing this, I heard for the first time the story of how he raced a neighbor to the back of a Needham supermarket to grab the last loaf of discounted day-old bread. But being frugal and unostentatious meant he had no need for great wealth and was not even tempted to break the rules governing a fiduciary’s conduct. Unlike many financial executives during the 1982–2000 boom and since, he lived in the same world as his clients—wealthier than most but not or­ders of magnitude wealthier. It also meant he was not likely to get caught up in the greed-driven, frenzied last stages of a bull market….

(more…)

Thursday, February 13th, 2014

Paul Cabot’s Jeremiad

In the following passage from Passion for Reality: The Extraordinary Life of the Investing Pioneer Paul Cabot, Michael Yogg examines Paul Cabot’s ideas about reform for the financial industry and the characteristics of a good investment manager. He also looks at some of the parallels between Cabot’s time of the late 1920s and 1930s and our present time:

Passion for Reality: The Extraordinary Life of the Investing Pioneer Paul CabotWhen a country loses its common sense and confidence, as America did in the late 1920s and the 1930s, it takes hundreds of clear-thinking leaders in government and the private sector to establish the rules, formal and informal, through which society rebuilds and functions. [Sidney Weinberg, head of Goldman Sachs] was one of those leaders. Paul was another….

For Paul, clarity, simplicity, and honesty were inextricably linked. He knew that a trust with an excessively complicated capital structure oft en had trustees who did not know what they were doing or had something to hide—in other words, trustees who were something less than able and honest. This is what lay behind Paul’s preference for the Boston-type open-end fund, with its one class of shares leading to all shareholders being treated equally. It is also why this type of fund accounts for almost all mutual funds today.

Among the many parallels between the late 1920s and late 1990s was the formation of exceedingly complicated investment funds whose structures of­fended the common sense of the clearest thinkers of their day. When Long-Term Capital Management (LTCM) sought the aid and the capital of Warren Buffett during its crisis, Buffett’s objection to the fund—according to Roger Lowenstein, biographer of Buffett and chronicler of the LTCM saga—was the overly complicated structure. If it took hours for Paul to figure out how profits were divided by some of the trusts of his day, he would have required months to understand LTCM’s capital structure or Enron’s deals with special-purpose partnerships owned and controlled by its own corpo­rate officers. He would not have been tempted by either of these “opportu­nities,” so popular with “sophisticated” investors at the end of the century.

Both 1929 and 2000 marked peaks in what Galbraith refers to as the “bezzle, an inventory of undiscovered embezzlement,” which is a measure of corruption that is as cyclical as any financial index. In prosperous times, when people are making money, they relax and look less critically at ex­actly how it is being made. Unscrupulous operators take advantage of this by perpetrating various types of fraud and “the bezzle increases rapidly,” according to Galbraith. When the prosperous times end, everything goes into reverse. Investors are more skeptical, even suspicious. Morality im­proves and the “bezzle” shrinks. The stock market boom and the ensuing crash caused a traumatic exaggeration of these normal relationships.

(more…)

Tuesday, February 11th, 2014

Interview with Michael Yogg, author of “Passion for Reality: The Extraordinary Life of the Investing Pioneer Paul Cabot”

Passion for Reality, Michael YoggThe following is an interview with Michael Yogg, author of Passion for Reality: The Extraordinary Life of the Investing Pioneer Paul Cabot. Find out how to win a FREE copy of Passion for Reality!

Question: Why did you chose to write about Paul Cabot?

Michael Yogg: I knew Paul for the last 16 years of his life (1978-1994) and worked for his company for nearly two decades. I’ve spent most of my life in the investment business but have been trained as both an historian and an investor. Paul was an important pioneer of the mutual fund industry in the 1920s, when he was also known for his denunciations of corruption on Wall Street. He had a major hand in crafting New Deal securities legislation, including the Investment Company Act of 1940, which is still fundamental to mutual fund regulation. He was an extraordinary investor, in part due to his insistence on meeting managements face-to-face, long before most of his competitors did so. He also was among the first to value stocks on earnings, their price/earnings ratio and growth rate, rather than the more traditional dividend yield that had prevailed before the mid-1920s. He quintupled the Harvard endowment when he was treasurer. And he was a tough, no-nonsense corporate director. But the most important reason for the book is who he was, not what he did, his personality and his character.

Q: Tell us more about that.

MY: Paul received a traditional, upper-class Boston Brahmin upbringing, and this shaped his character. But he was also an iconoclast, a rebel really; his personality and his strong will made him stand out. When he discovered dishonest behavior he became incensed. In spite of all the ethical problems we face in the financial markets today, no one gets as angry as Paul did when he detected and publicized mutual fund price manipulation, and when the perpetrators tried to shut him up by pressuring a bank where he was a director. “I flamed up. I got so god damned mad.” His morality and his temper extended to his private life. When he was reprimanded for bringing his close friend Sidney Weinberg, a Jew who was then head of Goldman Sachs, to his private club, his response was to tell the club president to stick the club up his ass. And Paul promptly resigned. He accomplished more than his contemporaries because of his stubbornness and what today is called “out-of-the-box” thinking.

(more…)

Monday, February 10th, 2014

Book Giveaway!: Passion for Reality: The Extraordinary Life of Investing Pioneer Paul Cabot

Passion for Reality: The Extraordinary Life of the Investing Pioneer Paul Cabot, Michael Yogg

This week we will be featuring Passion for Reality: The Extraordinary Life of the Investing Pioneer Paul Cabot, by Michael Yogg on our blog, twitter, and facebook.

We are also offering a FREE copy of Passion for Reality: The Extraordinary Life of the Investing Pioneer Paul Cabot to a lucky winner. To enter the contest please e-mail pl2164@columbia.edu and indicate your name and address. The winner will be selected Friday, February 14th at 3:00 pm.

Paul Cabot (1898–1994) was an innovative mutual fund manager and executive known for his strong character, charismatic personality, and trendsetting financial achievements. Iconoclastic and rebellious, Cabot broke free from the Boston Brahmin trustee mold to pursue new ways of investing and serving investment clients.

For more on the book, you can also read the introduction or preview the book.

Friday, January 24th, 2014

Dean Starkman Debates Whether the Business Press Failed the Public Trust

Recently, Columbia Journalism Review and Public Business, organized a panel Has the Business Press Failed the Public Trust?. Among the panelists were Dean Starkman, author of The Watchdog That Didn’t Bark: The Financial Crisis and the Disappearance of Investigative Journalism

The discussion, which also included Larry Ingrassia, (New York Times); Felix Salmon (Reuters); Suzanne Kapner (Wall Street Journal) and Jeff Horwitz (American Banker) focused on the the distinction between reporting for investors and the general public, the the press’s ability to shape public debate, and the role of non-business reporters in covering business scoops. As evident in the video below of the event, the discussion often turned heated and revealed some of the challenges journalists face in covering business and financial news and underscored some of the arguments made in Dean Starkman’s book.

Thursday, January 23rd, 2014

Dean Starkman on How and Why the Business Press Failed

Dean Starkman, The Watchdog That Didn't Bark

In The Watchdog That Didn’t Bark: The Financial Crisis and the Disappearance of Investigative Journalism, Dean Starkman argues that the business press missed the biggest story of the new century. More specifically,the mainstream business press failed to cover and convey to the public the looming dangers that would profoundly shake up the financial system in 2007.

The following is an excerpt from the opening of the book. A fuller excerpt can be found on the Columbia Journalism Review site.

The US business press failed to investigate and hold accountable Wall Street banks and major mortgage lenders in the years leading up to the financial crisis of 2008. That’s why the crisis came as such a shock to the public and to the press itself.

And that’s the news about the news.

The watchdog didn’t bark. What happened? How could an entire journalism subculture, understood to be sophisticated and plugged in, miss the central story occurring on its beat? And why was it that some journalists, mostly outside the mainstream, were able to produce work that in fact did reflect the radical changes overtaking the financial system while the vast majority in the mainstream did not?

This book is about journalism watchdogs and what happens when they don’t bark. What happens is the public is left in the dark about, and powerless against, complex problems that overtake important national institutions. Few need reminders, even today, of the costs of the crisis: 10 million Americans uprooted by foreclosure with even more still threatened, 23 million unemployed or underemployed, whole communities set back a generation, shocking bailouts for the perpetrators, political polarization here and instability abroad. And so on and so forth.

Was the brewing crisis really such a secret? Was it all so complex as to be beyond the capacity of conventional journalism and, through it, the public, to understand? Was it all so hidden? In fact, the answer to all those questions is “no.” The problem—distorted incentives corrupting the financial industry—was plain, but not to Wall Street executives, traders, rating agencies, analysts, quants, or other financial insiders. It was plain to the outsiders: state regulators, plaintiffs’ lawyers, community groups, defrauded mortgage borrowers, and, mostly, to former employees of financial institutions, the whistleblowers, who were, in fact, blowing the whistle. A few reporters actually talked to them, understood the metastasizing problem, and wrote about it. Unfortunately, they didn’t work for the mainstream business press.

In the aftermath of the Lehman bankruptcy of September 2008, a great fight broke out over the causes of the crisis—a fight that’s more or less resolved at this point. While of course it’s complicated, Wall Street and the mortgage lenders stand front and center in the dock. Meanwhile, a smaller fight broke out over the business press’ role. After all, its central beat—the one over which it claims particular mastery—is the same one that suddenly melted down, to the shock of one and all. For business reporters, the crisis was more than a surprise. There was even something uncanny about it. A generation of professionals had, in effect, grown up with this set of Wall Street firms and had put them on the covers of Fortune and Forbes, the front page of The Wall Street Journal and the New York Times, and the rest, scores of times. The firms were so familiar, the press had even given them anthropomorphized personalities over the years: Morgan Stanley, the white-shoe wasp firm; Merrill Lynch, the scrappy Irish-Catholic firm, often considered the dumb one; Goldman, the elite Jewish firm; Lehman, the scrappy Jewish firm; Bear Stearns, the naughty one, etc. Love them or hate them, there they were, blessed by accounting firms, rating agencies, and regulators, gleaming towers of power. Until one day, they weren’t.

(more…)

Wednesday, January 22nd, 2014

Interview with Dean Starkman, author of “The Watchdog That Didn’t Bark”

Dean Starkman, The Watchdog That Didn't Bark

“Journalism can be the antidote to corruption…. It gives the public a fighting chance to understand complex problems when powerful institutions betray their trust and act against the public interest. It can be a clarifying force, without which democracy in a complex age just can’t work.”—Dean Starkman

The following is an interview with Dean Starkman, author of The Watchdog That Didn’t Bark: The Financial Crisis and the Disappearance of Investigative Journalism

Question: Why did you write this book?

Dean Starkman: The short answer is, the financial crisis. Among business reporters, there were basically two broad responses among to the crisis: one group felt that it was a terrible catastrophe and should not be allowed to happen again. The other felt that it was more than that: just unacceptable, beyond the pale. I fall into the latter camp. Really, everyone understands that this was an epic event. But too few of my colleagues, I fear, have really internalized the dimensions of the disaster, the breadth of the corruption, the completeness of the regulatory collapse. This was one of those once-a-century moments when the system cracks open and allowed us all a long look inside and it’s important that this moment not be lost. For me, it all adds up to a story that needs probing from all angles, now and for many years to come. The fact that this disaster was entirely man-made, and occurred on the most high-profile of business-press beats—finance—made scrutiny of the media’s role all the more urgent from my point of view.

Q: But why you?

DS: Besides my journalistic credentials, which can be found here, it was and is actually my job to review and write about business news. I started running the Columbia Journalism Review’s business desk, The Audit, in the spring of 2007—an innocent time in retrospect. As many recall, the debt markets began cracking open not long after that and soon it dawned on us that the U.S. financial system—the envy of the world, powerful beyond imagination, festooned with brand names, blessed by armies of lawyers, accountants, raters, regulators, the crème of our elite educational system—might be a mirage. The crisis had a big impact on my worldview. In essence, it confirmed it.

Q: How so?

DS: In two ways. I spent the first 15 years or so of my career as an investigative reporter at regional papers, then made the transition to being a business reporter at The Wall Street Journal. I always felt an investigative reporter was something of a mini-expert on subcultures—of the police department, the court system, the state house, etc.—whose job it was to learn its mores and idioms, to figure out whether the culture was healthy or not, and to report back to the wider world on how things were going there. When I arrived at the paper, I didn’t know exactly what to expect but it soon became apparent that I had joined a different journalism subculture from the one I had known at regional papers. The Journal was unique in many ways, but it was also certainly part of, if not, the leader of, this business-press subculture, which had its own particular view of what a “story” was—that is, what got into the paper, what we today call “content.”

Admittedly, I wasn’t hired as an investigative reporter. Even so, the boundaries—invisible and unspoken yet real enough—struck me as arbitrary and, to my tastes, narrow. Also, they were fungible. They moved over time. In my view, they narrowed. In any case, coming from outside the culture, I spent a lot of time trying to decode it—where did these ideas about business news come from, and how did we decide these were the right ones—and part of that decoding formed the basis for this book.

Q: And the second way?

DS: The second way involves the idea of corruption. I cringe in way to use that word because it has a shrill tenor and yet I saw enough of it in Rhode Island to understand that it actually does happen, at the highest levels, and that its effects are immensely damaging. Unlike the muckrakers, I’m not sure it’s about good or evil on the part of individuals, although there’s that. But normally all it involves is power imbalance or perverse incentives, or both, leading a state where normal regulation, oversight, and law enforcement are subsumed. A great reporter and friend, John Sullivan, had a theory that 10 percent of the people can always be counted on to do the right thing, and 10 percent will always do the wrong thing, but 80 percent will go with the flow. That’s how corruption happens, and how it can become systemic, as it did in the mortgage industry.

The sense that the deck is stacked, that contracts are rigged, or that tax authorities or police act at the behest of a corrupt mayor, undermines the public’s faith in the system itself. Corruption actually threatens democracy. And it was clear to me at the time, just as it was clear to some of the journalists profiled in Watchdog, that the financial system had crossed a line from competition to recklessness and into corruption.

The crisis confirmed that view and reinforced the dangers of corruption to markets and to democracy itself. Clearly, ours was badly shaken, and the subsequent effects in Europe drive the point home even further.

Q: What’s all that got to do with journalism?

DS: Journalism can be the antidote to corruption. It certainly has been in the past, as I demonstrate in Watchdog. But even if it isn’t, it gives the public a fighting chance to understand complex problems when powerful institutions betray their trust and act against the public interest. It can be a clarifying force, without which democracy in a complex age just can’t work. If that sounds like I’m waving a flag with big “J” on it, well, so be it. The great Walter Lippmann despaired of democracy working in a far-flung industrial power and believed elites should be left alone to solve complex problems. I think we’ve learned that doesn’t work. So this is what we’re left with.

Tuesday, January 21st, 2014

Book Giveaway! Win a Free Copy of “The Watchdog That Didn’t Bark: The Financial Crisis and the Disappearance of Investigative Journalism,” by Dean Starkman

“Journalism was complicit in the predation and corruption that brought down world financial markets and wrecked the lives of millions…. Dean Starkman is the author we have been waiting for to tell this story. He not only puts forward a keen, subtle, and fair account of the journalistic default, he names names.” — Todd Gitlin

The Watchdog That Didn’t Bark: The Financial Crisis and the Disappearance of Investigative Journalism, Dean Starkman

This week we will be featuring The Watchdog That Didn’t Bark: The Financial Crisis and the Disappearance of Investigative Journalism, by Dean Starkman, on twitter, facebook, and the Columbia University Press blog, .

We are also offering a FREE copy of The Watchdog That Didn’t Bark: The Financial Crisis and the Disappearance of Investigative Journalism to a lucky winner.

To enter our Book Giveaway, simply e-mail pl2164@columbia.edu with your name and preferred mailing address. We will randomly select one winner on Friday, January 24 at 1:00 pm. Good luck, and spread the word!

You can also read an excerpt from The Watchdog That Didn’t Bark: The Financial Crisis and the Disappearance of Investigative Journalism posted on the Columbia Journalism Review site.

Thursday, January 16th, 2014

August Turak on the Myth of Personal Development

Columbia Business School Publishing

August Turak, Business Secrets of the Trappist Monks: One CEO's Quest for Meaning and AuthenticityIn a recent article for Forbes, August Turak, author of Business Secrets of the Trappist Monks: One CEO’s Quest for Meaning and Authenticity (Columbia Business School Publishing), takes a closer look at what is meant by “personal development” and how it is frequently misunderstood.

In interviews about the book, Turak is frequently asked “What do you do for personal development?” However, how most people think about personal development in a business context is different from Turak’s view. While many tend to think of it as a means to success, Turak believes personal development is the end. Turak explains:

“Personal development” is compartmentalized; it becomes something we do off the clock and in our spare time in order to “get ahead” in the “real world.” Slowly and unwittingly we become like the real estate agent who religiously accompanies his family to church only because being perceived as a family oriented, God fearing man is “good for business.”

This entire world view tragically puts the proverbial cart before the horse. Whether you call it personal development, personal growth, self-actualization, self-transcendence, or spirituality does not matter. What matters is realizing that the reason you were born is to become the best human being you can possibly be. Personal development is not a tool for reaching a bigger goal. Becoming a complete human being is already the biggest and most noble goal you can aspire to.

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