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Archive for January, 2013

208924_10151219093223696_1160063796_n-1[1]OK.  Gird your loins, friends.  This is an “I told you so” column, per my dour posting of Nov. 13.  (Ten Predictions, Obamacare and Entrepreneurship).  Already two of my predictions concerning Obamacare have come true.  The good news is that there are some partial remedial options for the havoc that is already being felt in our small business community.
 
First let’s review my predictions per Obamacare.  I said:
  • Employment growth will become moribund as small businesses strive to stay under 50 employees and out of the iron grasp of the government”s 150 new medical regulatory entities.
  • As a logical correlation of this, small companies will be forced to limit their growth.  The start-up risks and bureaucratic limitations presented by the Affordable Care Act will disincentivize innovation and growth.
We are there.  A November 28th article in the WSJ reports a survey from Vistage International, Inc. that already finds a significant drop in small business optimism.  The survey’s overall confidence index (based on 740 small business owners) fell to 83.9 from 93.3.  The survey’s index of expected economic conditions fell to 77 from 105.  Only 43% of owners anticipate higher profits in the coming year, down from 50% in October, 2012.  23% of owners plan to decrease their self-investment.  The non-partisan Congressional Budget Office now says Obamacare will cost the country over a million jobs, mostly in small business.
 
Furthermore, remember that promise that no one would lose their present insurance?  Not true.  Here’s why.  Employers can no longer afford it.  Per a NY Times story in early January, it turns out that insurance companies can raise rates as much (or more) than before the law was enacted.  The Times reports, “…health insurance companies across the country are seeking and winning double-digit increases from customers, even though one of the biggest objectives of [Obamacare] was to stem the rapid rise in insurance costs….Particularly vulnerable to high rates are small businesses.”  The article notes that, in California, Aetna is proposing rate increases of as much as 22%, Blue Cross 26%, and Blue Shield 20%.  The Affordable Care Act is a bonanza for these insurance companies.  They love it.
 
Betsy McCaughey, in an op-ed in the NY Post (Jan. 16, 2013), notes a report from the Centers for Medicare and Medicaid Services.  The report says many employers will simply discontinue health benefits for their employees.  James Sherk of the Heritage Foundation estimates Obamacare will add $1.79/hr. to the cost of a full-time employee.  This can be especially damaging with regard to lower wage full-time employees in areas like retail, construction, restaurants, and medical services.
 
I heard John Mackey of Whole Foods state in-person last week that Obamacare may legally force him to discontinue his healthcare program for employees, even though his plan is much more generous than the new mandates.
 
This is madness.
 
obamacare-cartoon[1]There was an illuminating annecdotal case study in the WSJ on January 17 (Page B-1) concerning Meash & Mia, a successful and growing clothing boutique.  “We are poised this year to more than double or even triple business.” says Elizabeth Turley, the founder.  She needs and wants new committed employees, but feels she must fumfer by with contractors and temps.  Why?  Simply because Meesh & Mia is on the edge of having over 50 employees already.  Or take a Nebraska network of Wendy’s Restaurants.  They recently announced they are cutting back employee’s hours to part-time to avoid the mandate.
 
So here are five palliatives that may help us all survive the Obamacare (ACA) mandates.  (I dislike offering these suggestions because they assume a cynical need to game the system. Nevertheless…)
  1. Opt out.  Stop health coverage altogether.  For the employer the penalties are lower than the cost of insurance under the added coverage demanded by government mandates. 
  2. Avoid the 50 worker threshold by outsourcing and using part-timers.  But be careful about hiring contractors.  The IRS is gearing up to increasingly contest  contractor status.  (My guess is that temp worker stocks like Robert Half and Manpower will go through the roof over the next couple of years.) 
  3. Reduce or end coverage for retired workers.
  4. Offer only higher-deductible plans or just give employees a lump sum to apply to any plan they want in the new government exchanges.
  5. Have your employees become one man corporations.  You then pay them as corporate entities.  This has already worked quite effectively for large companies like IBM, Intel, and Microsoft.  Paul Christiansen details this option in yesterday’s (January 29, 2013) WSJ op-ed page, if you are interested.
No matter the compassion and empathy most of us have for our employees, ROI survival may militate some unpalatable choices for many of us.

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safe_imageI’ve been following John Mackey of Whole Foods for several years.  I can’t say enough about this guy.  I’ve spent the weekend reading his new book Conscious Capitalism. (2013, Harvard Business School Publishing Corporation)

Originally I wrote about Mackey back in 2011.  (John Mackey and Entrepreneurship)  In a long interview about his new book before members of the Inc Business Owner’s Council at NASDAQ last Thursday, he spoke eloquently about his new book and his beliefs.

For Mackey, capitalist enterprise should be based on three ideas:

 

  1. Conscious Capitalism exists for a higher purpose beyond just making money.  He says, “When any profession becomes primarily about making money, it starts to lose its true identity and its interests start to diverge form what is good for society as a whole.”
  2. Conscious Capitalism creates value for all stakeholders, including employees, suppliers, customers, the communities they serve, as well as investors.  (To cite but one example, Mackey believes in complete compensation transparency. He operates his large operation with what sounds like a version of Jack Stack’s Open Book Management.  He walks the walk of his talk very personally.  For example, Mackey caps his own and his top executive’ compensation at 19 times the average Whole Food wage.  The average in most companies is over 100 times the average.)
  3. Conscious Capitalism requires “servant” leaders—that is, leaders who are “not primarily motivated by the pursuit of power and personal enrichment.”

Mackey urgently proselytizes that capitalism is not a rapacious, sociopathic institution.  He preaches the belief that simple goodness and higher purpose is also a wise policy for creating shareholder value.  He harshly castigates American business schools for their blinders-vision focus on money and profit rather than on creation of long-term value.  (I couldn’t agree more with this.)  He passionately rejects the notion of capitalism as a zero-sum game and he feels MBA programs need to let go the war metaphors and darwinian tonality that couches much of business management language and pedagogy.

Mackey believes that business needs to be grounded  in a new kind of ethical trope.  He is alarmed that a recent poll shows only a 17% approval rating for big business and 34% for small business.  He believes this attitude must change for the good of the world.  He believes that capitalism should be lifted up not denigrated, since much of the astounding progress of the modern world has come about through capitalism.  In his first chapter, Mackey and his co-author Raj Sisodia state:

“This is what we know to be true.  Business is good because it creates value, it is ethical because it is based on voluntary exchange, it is noble because it lifts people out of poverty and creates prosperity.  Free enterprise capitalism is one of the most powerful ideas we humans have ever had.”  (P. 21)

Mackey is remarkable in that he is a self-taught practical intellectual.  Though he never graduated from college, his conversation is fluidly peppered with references to thinkers like Friedrich Hayek, Milton Friedman, Ludwig Von Mises, Adam Smith, and many others.  His argument for conscious capitalism is richly buttressed by his immersive understanding of these classical economic thinkers.

R19188.inddI could go on about Mackey, but entrepreneurs should simply read his new book.  He has a missionary zeal for defending basic goodness as a bedrock principle of effective capitalist enterprise.  He passionately believes in the importance of the entrepreneur as the purest modern practitioner of capitalism at its best.  He writes:

“With few exceptions, entrepreneurs who start successful businesses don’t do so to maximize profits.  Of course they want to make money, but that is not what drives most of them.  They are inspired to do something that they believe needs doing.  The heroic story of free-enterprise capitalism is one of entrepreneurs using their dreams and passion as fuel to create extraordinary value for customers, team members, suppliers, society, and investors.”

So, thank you, John Mackey, for this thoughtful and compelling book.  Also, much gratitude for the palpable love and support of our small business enterprise community offered by Conscious Capitalism.

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Carol_Goman_For me, the smallest details often can make a big difference in leading my firm Corporate Rain and being it’s chief rainmaker.  While I think a lot of entrepreneurial leaders do many of the following things instinctively, here are some simple apt tricks and techniques offered by my friend and body language expert Carol Goman to get yourself off the snide.  Carol wrote the book The Silent Language of Leaders:  How Body Language Can Help–Or Hurt–How You Lead.

Here’s some of what she suggests.

  1. To boost your confidence before an important meeting, replace your smart phone with a newspaper.  Research from Harvard and Columbia Business Schools shows that holding your body in expansive “high power” poses (standing tall with shoulders pulled back, widening your stance, spreading your arms to expand space) raises testosterone and lowers the stress hormone cortisol.  The simple expansive act of holding the arms spread wide, necessitated by holding a newspaper, prevents you from hunkering bent over your cellphone.  It increases your confidence and lowers your stress.
  2. To spot a liar, look out for these four tell-tale signs:  hand touching, face touching, crossed arms, and leaning away.
  3.  To make a difficult task seem easier, smile.  Yup.  No matter the task, when you grimace you are sending your brain the massage:  “This is really difficult.  I should stop.” Simply smiling tells your brain, “This isn’t so bad.  I can do this!”  (Carol cites Charles Garfield, the author of Peak Performance, who once coached the Russian Olympic  weight-lifting team.  Garfield noticed that when team members lifted to exhaustion, they would invariably grimace at the painful effort.  In an experiment, he encouraged the  athletes to smile when they got to the point of exhaustion.  This minor difference enabled them to add 2-3 more reps.)
  4.  To reach an agreement, send early engagement signals like nodding, mirroring, smiling, and open gestures.
  5.  When meeting in your office, encourage collaboration by coming out from behind your desk or creating a conversation area (chairs of equal size set around a small table or at right angles to each other) to encourage informality, equality, and partnership.
  6.  To reduce resistance, hand out your business card.  People who are defensive, guarded, or resistant may cross their arms or fold their legs.  To neutralize this kind of  resistance offer the individual a cup of coffee or hand out your card, brochure, or product sample.  With a large audience invite people to raise their hands.  Because body positions influence attitude, the mere act of unwinding a resistant posture will subvert resistance.
  7.  To maximize your authority, minimize your movements.  Take a deep breath, bring your gestures down to waist level, and pause before making a key point.  When you appear calm and contained, you look more powerful.
  8.  To diffuse tension, realign your body more congenially.  If you physically align yourself with that person (sitting or standing shoulder to shoulder facing the same direction) confrontation is eased.
  9. Leonardo-Da-VinciTo “seal the deal,” make a positive last impression.  Stand tall.  Shake hands warmly.  Smile.  Say “thank you.”  Leave your counterpart with the impression you are  someone to look forward to dealing with.

All this may seem almost naive in its simplicity, but I find these tips easily actionable and right on.  My experience is that small detailing, like body-language adjustment, often achieves more than eloquent presentation.

As Leonardo da Vinci said, “Simplicity is the ultimate sophistication.”

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Like everyone else, I watched with horror the “fiscal cliff” drama unfold last week.  Beyond the obvious inability or unwillingness of our present elected government to deal with our long-term profligate spending, the one new thing I noticed from the fiscal debate is that Big Business is not necessarily the friend of Small Business.  It appears that Big Business is increasingly thick as thieves with a growing and innately inefficient governmental regulatory apparatus that  redounds heavily against the interests of the small business community.

This trend became especially notable in 2007-8 as the government bailed out GM. AIG, and the big banks.  Then I saw that Big Business seemed to have no particular problem with the burgeoning bureaucracy being laid on top of Obamacare—a true danger to the business health and creative freedom of entrepreneurs.  The backslapping cronyism of Jeffrey Immelt, George Kaiser, Larry Page, Lloyd Goldfein, Ken Chenault, and other corporate oligarchs was both unseemly and counter-intuitive to healthy enterprise based on freedom and fair competition in the marketplace.  It had the effect of institutionalizing deep systemic failures, rather than allowing the cleansing process of capitalism to work.

Nassim Taleb, in his new book Antifragile, does a great service in making the compelling case that Big Business has much more in common with Big Government than either do with entrepreneurship.  In an op-ed in the New York Times over the holidays, Taleb said the following:

“It’s a myth that centralization and size bring ‘efficiency.’  Centralized states are deficit-prone precisely because they tend to be gamed by lobbyists and large corporations, which increase their size in order to get the protection of bailouts.  No large company should ever be bailed out; it creates a moral hazard.

Consider the difference between Silicon valley entrepreneurs who are taught to ‘fail early and often,’ and large corporations that leech off governments and demand bailouts when they’re in trouble on the pretext that they are too big to fail.  Entrepreneurs don’t ask for bailouts, and their failures do not destabilize the economy as a whole.”

Exactly.

Also note the recent collusion of The Business Roundtable (a lobbying group for Big Business) with the current anti-entrepreneurial federal government.  On December 11, 2 The Business Roundtable circulated a letter signed by 150 titans of business supporting income tax hikes in exchange for lowering corporate tax rates from 35% to 28%.  While I fully support  the reduction of American corporate business rates (currently the highest in the world), this proposal shifts the full cost of the Big Business tax reduction onto Small Business.  As Kimberly Strassel puts it in an op-ed  in the WSJ on December 20. “[Big Business] saw an opportunity to make the one million small American business owners who pay individual income taxes shoulder a big rate hike (up to 39.6% from 35% while radically lightening the tax load for the Roundtable’s own corporate behemoths.”

BruceBabbitt_big

We certainly need to radically reform the tax code and reduce our debt.  However, it would be a disaster for the economy if it was done on the back of Small Business.  Three out of four new jobs come out of Small Business.  With the disincentives to growth already enshrined in Obamacare this new law could surely be a double whammy for national economic and job recovery.

Or, as former Arizona Senator Bruce Babbitt puts it,  “The notion that big business and big labor and big government can sit down around a table somewhere and work out the direction of the American economy is at variance with where the American economy is headed.  I mean, it’s like dinosaurs gathering to talk about the evolution of a new generation of mammals.”  Yup.  Thanks, Bruce.

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watts-wackerI had lunch with my delightful friend, futurist, writer, and business wizard Watts Wacker, CEO of FirstMatter, over the holidays.  Our talk eventually turned to what’s happening in business and what makes for a happy, fulfilling business life.  He strongly recommended I swing by Rockefeller Center before I went to my next meeting and look at the emblazoned words of John D. Rockefeller, Jr. recorded there.

I did.  Here’s what was written there.  I can’t think of a better note on which to enter the new business year.  Happy New Year!

“I believe in the supreme worth of the individual and in his right to life liberty and the pursuit of happiness.  I believe that every right implies a responsibility, every opportunity, an obligation; every possession a duty.

I believe that the law was made for man and not man for the law; that government is the servant of the people and not their master.

I believe in the dignity of labor, whether with head or hand; that the world owes no man a living but it owes every man an opportunity to make a living.

I believe that thrift is essential to well-ordered living and that economy is a prime request of a sound financial structure, whether in government, business or personal affairs.

20090722141555I believe in the sacredness of a promise, that a man’s word should be as good as his bond; that character, not wealth or power or position, is of supreme
worth.

I believe that the rendering of useful service is the common duty of mankind and that only in the purifying fire of sacrifice is the dross of selfishness consumed
and the greatness of the human soul set free.

I believe in an all-wise and all-loving God, named by whatever name, and that the individual’s highest fulfillment, greatest happiness, and widest usefulness
are to be found in living in harmony with His will.

I believe that love is the greatest thing in the world; that it alone can overcome hate; that right can and will triumph over might.”

Thank you, John.

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