In particular, Johnson mentioned a recent paper by Andrew G. Haldane, Executive Director, Financial Stability, for the Bank of England. Haldane wrote about the idea of a  “doom loop” in the financial system. According to Johnson, the “doom loop” concept “is actually just another term for a cycle in which you have a boom, a bust and bailouts” — except the bailouts are done “in a sufficiently unconditional way” so that “the core structure of the financial system remains the same.”

The problem? Such a bailout may incentivize bankers to take excessive financial risks in the future. ”State support,” Haldane writes, “stokes future risk-taking incentives, as owners of banks adapt their strategies to maximise expected profits.”    

And the risk, according to Johnston, is that a future financial crisis could lead to a second Great Depression.

Johnson’s advice? Make megabanks smaller. He drew an interesting analogy to the development of antitrust law; in 1890, Johnson said, the idea of proposing a cap on the size of private business would have seemed ”ludicrous” in mainstream thinking. But then, over the next 20 years, Johnson argued, “we learned the hard way that having massive monopolies or trusts –as they were then called — develop was bad for society.” 

Similarly, today, when it comes to the banking system, “I think we have to extend our thinking,” Johnson said.

During a compact introduction, Dean David Schmittlein noted that introducing the notion of corporate responsibility into one’s business as Seventh Generation has, “adds complexity.” Hollender’s talk delivered some of that complexity.

Hollender is the “chief inspired protagonist” of Seventh Generation (some founders get to pick their own titles). As someone whose role at the company revolves around thinking, it’s no surprise that he started and ended his talk with words about consciousness in the most basic sense: the decisions you make are based on what you pay attention to. In world full of unintended consequences, he argued, “what you pay attention to helps you end up with more of the consequences you want.”

The consequences Hollender wants, for his business, his society, and his planet, are “revolutionary. Many of our problems will not be solved by the sort of incremental change that we see in the political process and in business.” He went on to diagnose our current predicaments (economic, environmental, and moral) and offered some possible ways out. Although the audience was a mix of students, faculty, and staffers, it was clear that it was the students he was talking to. “We don’t want to sustain the world we have,” he said. “We want to change it.”

“The single greatest challenge we face,” he said, “is the system we have created, embodied in academics and business. We have taken a world that is endlessly interdependent and divided it into countless pieces. There are two million NGOs that have taken a piece of the problem, same in business, but failed to realize that everything one does affects the other.” He celebrated cross-disciplinary collaboration (citing the global sustainabile food lab associated with MIT Sloan’s Peter Senge) and identified what he said are the “keys that are critical to what kind of solutions are necessary”:

• He talked how how business money in politics is “negative and disruptive, and it prevents the transition to a sustainable economy.” He advocates full public financing of elections.
• He argued for full cost accounting. “In our society, good things cost more than bad things. Why? Government rules lead to an incredible distortion in the economy … if you’re a business and you do the right thing you get no benefit from an institutional perspective.”
• He laid out an argument against the current structure and ownership of business and financial markets. “Things get more expensive even when there’s no increased demand. The purpose of business has become misguided, immoral even … we need the influence of government to be in line with the interests of society. Right now the deck stacked against sustainable businesses.”
  

Hollender’s proposed solutions are those he has made in print and in person before — businesses should practice radical transparency, treat their employees as their greatest assets, and exert leverage through supply chains (he spoke at some length on how WalMart has become a de facto regulator). During a brief question-and-answer session, he emphasized that his own company has far to go to live up to its own values. “Out biggest failure as company is that we have failed to make even marginal impact when it comes to justice and equity… We make compromises every day. The key is to be transparent about them.”

And Hollender concluded with a note about the contradictions inherent in the economics and politics of our time. He spoke of meeting a representative of the Service Employees International Union, who told him that, to get an acceptable return, “the SEIU pension fund invests in mutual funds that are full of companies who want to put labor unions out of business.” It’s quite complicated.

Some people vow never to go to bed angry. Simon Cooper, president and COO of the Ritz-Carlton Hotel Co., never ends the evening with an email unanswered.

Every manager must decide on an approach to email. Are you available all waking ours? Are there strict off-limits rules you try to live up to? How are you managing email? Please let us know in the comments.

How’s your Great Recession coming along? Many publications, including MIT Sloan Management Review, are passing on the word that the real risk during a recession is not investing, and the most recent McKinsey Quarterly goes deep on Using the crisis to create better boards. The research at the heart of the report isn’t game-changing — no reader will be shocked to learn that “only half of the 186 directors responding thought their boards had met the demands of the crisis.” What is useful in this article are the three areas (culled from a report by the executive search firm Heidrick & Struggles) in which corporate boards need to improve: “the availability of directors for extra board meetings and discussions; the widespread absence of committees for special topics, such as audits, remuneration, nominations, and strategy; and the excessively long service of some directors.” Work on those areas and there’s a better chance you have a board built for these times.

You might not associate a company best-known for decades-old postage meters for the latest in innovation ideas, but, in Integrated Innovation at Pitney Bowes, from strategy+business, you can find some useful and unexpected lessons. After a bit of the convention wisdom we’ve been referencing (”We’ve chosen to increase our innovation spending in this economic downturn.”), Pitney Bowes exec David Dobson gets past the rhetoric and describes what the company is doing:

“We implemented a program called New Business Opportunity (NBO), intended to generate a pipeline of new ventures with significant revenue possibilities. Typ­ically, NBO ventures involve the participation of several of our business units; we provide leadership and small teams, with funding from both corporate and business units. In launching one of these businesses, we do a lot of in-market testing and development; if we find the early results disappointing, we’ll adapt our strategy or simply kill the idea and move on to the next opportunity.”

For another take on this, we recommend Alexander Kandybin’s Which Innovation Efforts Will Pay?, in the fall issue of MIT Sloan Management Review.

Finally, One of the signs of a good column is that it informs or entertains you even when you disagree with it. “Schumpeter,” in The Economist, is a young column, but it lives up to that criterion. This week’s column, The cult of the faceless boss, offers at least one laugh-out-loud sentence (”Henry Ford was as close as you can get to being deranged without losing your liberty.”) and a cogent yet wide-ranging argument for why the current crop of keep-your-head-down CEOs are not what companies need. As the column concludes:

“Few people pay any attention to the identikit bosses who keep popping up to hum their corporate muzak about doing well by doing right. The best ambassadors for business are the outsized figures who have changed the world and who feel no need to apologise for themselves or their calling. There is no long-term comparative advantage in being forgettable.”

That’s not the popular view of the moment, but it’s a tough-minded counter to the conventional wisdom, which every manager and every board need to hear. For a different take, here’s a different perspective on superstar CEOs.

What are you reading to become a better manager? Please share what you’ve learned in the comments below.

Interestingly, Cox came not only to speak but also to listen. She spent a portion of the one-hour presentation encouraging the audience who had come to hear her to talk in small groups among themselves, sharing their views about how serious the world’s energy and environmental challenges are — or whether they can be addressed through technological advances.

Cox herself didn’t sound very sanguine — except about the supply of fossil fuels in the coming years. (”It’s my view that there’s plenty of fossil fuels around,” she said.) But on environmental issues — from climate change to fish populations — her tone was more somber.  ”We just cannot sustain the resource-intensity of the last 20 years,” Cox said at one point.  

While she observed that there is a growing consensus around the science about climate change, Cox admitted that she worries that our “system is stuck” on a path that will not allow the  problem of climate change to be addressed until it’s too late. “I have to say I am not optimistic,” she said. However, she added, “I do not believe that that is in any sense an excuse for inaction.”

Here’s a paraphrase of a discussion-starting question Cox posed to the attendees at her presentation. On a scale of  -10 to +10 — where +10 means we are fundamentally mismanaging the resources of the planet in a way that’s unsustainable and -10 means that technology will solve the problems – where do you each stand? What’s your personal perception about how serious the earth’s environmental and climate change problems are?

But let’s stick with Mad Men for a second. It’s a show about work and one of the things it shows is how people are passionate about that work. In this past weekend’s final episode, which even one of the smartest management thinkers we know is raving about, the show’s star tries to convince his boss to come along with him on a new endeavor. He says:

“I’m sick of getting batted around like a ping pong ball. Who the hell is in charge, a bunch of accountants trying to turn a dollar into a dollar ten? I want to work. I want to build something of my own, how do you not understand that?”

This is art, not real life, so let’s not go overboard on drawing management lessons from a few lines of TV dialogue. But he has a point. He wants to work. He wants to build something. That’s a good pair of goals for any manager, real or fictional.

P.S. We can’t find an embeddable clip of Draper saying those words. Please let us know if you see one.

UPDATE: And don’t forget Minztberg’s talk on “Managers Not MBAs: Debating the Merits of Business Education” at MIT World:

The most useful management reading over the past week comes from Gina Trapani, the founder of the Lifehacker website, over at Harvard Business. In A More Practical Creative Sabbatical, Trapani takes on something that has bothered us and makes sense of it. We’re big fans of the work of designer Stefan Sagemeister, but a recent TEDtalk about how he takes off every seventh year to concentrate on experiments was troubling. His presentation was effective and inspiring, but it’s not particularly replicable: not many among us can abandon our jobs so regularly. Trapani recognizes this and, in her usual make-every-moment-count approach, walks through ways to create “micro-sabbaticals,” habits we can work into our normal workdays. Her advice is modest — maximize your commute time, find some freedom in a repetitive physical activity, get away from your desk — but her underlying argument is a welcome one: you don’t have to take a full-blown sabbatical to give yourself some space to grow.

In the current economic climate, however, too many of us are stuck on forced sabbaticals. And it has become a truism in management circles that a downturn is no time to stop investing in research and development. Our recent special report on managing in the downturn covers this. So does Success and the Power of Research from the latest issue of Design Mind, the magazine about business, technology, and design from the Frog Design consultancy. In the article, Henry Tirri, head of the Nokia Research Center, argues that investing in R&D in an economic downturn isn’t just a good idea: it’s critical. He makes the usual arguments and looks back at how Finland’s business R&D’d its way out of its deep early-’90s recession. Most interesting is when he elaborate on his notion that the very purpose of research is to give companies choices:

“The question then becomes, which choices should be made? As in a game of speed chess, where players have to make their best move within a strict time limit, research teams working in a downturn must focus on choosing the best opportunities they have within the constraints presented to them. Teams have to start making optimal decisions based on short-term goals rather than long-term plans. Under this sort of pressure, a good, approximate decision is better than a great decision made at the expense of time. Most researchers have a tendency to go with the most optimal decision, but economic situations create a need to move fast. This means selecting the most promising and mature projects, and accelerating the most disruptive products as well. There still is substantial risk in this process. People and companies are naturally impatient, and they don’t tolerate failures before wins. But it still may take time for the efforts of research to come to fruition. For those organizations that have the discipline, however, the benefits can be enormous.”

Finally, everyone wants to develop the habits that will make them successful. Everyone from Stephen Covey to David Allen offer borderline-cult-like methods for being more efficient or effective. Nowhere is this obsession with habits more blatant than among writers. What brand pencil do you use? What time of day to you write? Lined or unlined index cards? In How To Write a Great Novel, The Wall Street Journal checks in on the habits of 17 celebrated purveyors of fiction and comes up with some amusing ones: Nicholson Baker dresses up as his characters, Anne Rice insists on writing in 14-point Courier font, and MIT’s Junot Diaz locks himself in the bathroom and perches himself on the edge of the bathtub. We present these tips to you not because we think you should replicate them — they’re idiosyncratic to the life of each writer — but because of what they all have in common: a smart, committed professional trying all sorts of wacky things until he or she finds something that works. Sounds to us like an approach to management.

What are you reading to become a better manager?

Watkins has a new book, Your Next Move, which considers how best to handle all sorts of career transitions: promotions, international moves, and more. What do you do, for example, when people who were your peers last week are now reporting to you?

When I write we’ll be interviewing Watkins next week, I really mean we. You have plenty you’d like to know about making the right moves. Here’s a chance to find out from an expert in leadership transitions. Put your questions for Watkins in the comments box below and he’ll answer the best of them. Career transitions are moments of great risk and opportunity. Here’s a chance to ask an expert how best to transition into your next role.

The biggest surprise that data revealed, according to Rogoff? The universality of financial crises. More specifically, Rogoff in his talk compared the current financial crisis in the U.S. to a number of other post-WW-II financial crises. (Interestingly, he pointed out, there’s little difference in the frequency of banking crises in advanced economies and emerging ones.)

Here are some of the features of the aftermath of a typical post-WW-II financial crisis, according to Rogoff:

• From peak to trough, housing prices go down a historical average of 35.5% in a financial crisis — and the duration of the downturn in housing prices is an average of 6 years.

• Similarly, peak-to-trough real equity prices drop an average of 55.9% — and the average duration of the downturn in equity prices is 3.4 years.

• The unemployment rate in the aftermath of a financial crisis goes up an average of 7 percentage points — and the duration of the employment downturn is an average of 4.8 years.

• In the aftermath of financial crises, central government debt often “explodes” in amount, Rogoff noted. On average, central government debt increases 86%.

Not a cheery picture overall. But Rogoff pointed out that it could be worse. Six to eight months ago, he observed, you could have worried with a straight face that we might have another Great Depression. But, Rogoff indicated, he thinks the chances of that happening now are small.

For more on Rogoff and Reinhart’s findings and analysis, check out this recent segment from The NewsHour with Jim Lehrer:

Why do lists of Twitter accounts matter? 

Twitter Lists are an efficient way to find Twitter-people that you don’t know, but should. Consider this list of 500 entrepreneurs, founders, startups, CEOs, and influential business people put together by Peter Urbanski. When you subscribe to a list like this, the updates of everyone in the list appear in your Twitter feed—You don’t have to subscribe to each individual account. You may not want to subscribe to a list with 500 active Twitterers, but take a quick look and you may turn up a handful of interesting, thoughtful people you do think are worth following.

More important, Twitter built Lists into its API, so its users can design new features. Already there are new products and services building on the Lists API, among them Listorious, a directory of “the best Twitter Lists” and TLISTS (currently in private beta), which promises a set of tools to help companies curate their Twitter Lists.

Enabling user-generated innovation and then getting out the way is something Twitter does well, as Eric von Hippel, MIT Sloan’s Professor of Management of Innovation, as points out in Twitter Serves Up Ideas From Its Followers:

“Twitter’s smart enough, or lucky enough, to say, ‘Gee, let’s not try to compete with our users in designing this stuff, let’s outsource design to them.’”

Are you using Twitter Lists? What do you think is the most important thing about the new feature? What’s still missing?

Update: via Wilson Raj and Guy Kawasaki, comes this article from Daniel B. Honigman on How brands can use Twitter lists.

Roger Martin, dean of the Rotman School of Management, talked about fixing MBA education so it no longer produces, as The Economist calls them, “jargon-spewing economic vandals.” He spoke in detail about moving the MBA curriculum from shallow to deep, narrow to broad, static to dynamic.

John Maeda, formerly of MIT and now president of the Rhode Island School of Design, talked about how fundamental “hand-based” knowledge is being lost as part of our transition to new technologies and new models.

If these intrigue you, there are plenty more.

That may have happened to some people at last week’s Pop!Tech conference, in Camden, Maine. One of the speakers was Michael Pollan, author of The Botany of Desire, who delivered a variation of his standard talk on sustainable food. In that talk, he dropped this nugget:

“A vegan in a Hummer has a lighter carbon footprint than a beef eater in a Prius.”

It’s unlikely that Pollan’s talk will drive meat eaters to the tofu aisle in the supermarket; it’s even more unlikely that it will make a Prius driver feel comfortable making a guilt-free move to a Hummer. But what Pollan did was frame the sustainability question in a new way, a way most of his audience (both in Camden and on the Internet) had not considered. At the least, it may make Prius driver feel a little less smug about their auto choice. At most, it may help viewers (managers among them) understand that sustainability is more complicated than a few consumer choices. It’s complicated stuff; that’s why we produced a special report on the business of sustainability.

Interested in seeing more of Pollan’s talk (and excerpts from other Pop!Tech talks)?

UPDATE (Nov. 12): You can now see all of Pollan’s talk:

Welcome to “The Pile.” Inspired by Kedrosky, we’re going to try something similar here. Every Sunday evening, just as we’re putting on our armor for the work week ahead, we’ll share the best of what we’re reading in our attempt to understand what’s new and important in management. (Warning: Some of these web links may require you to register or pay to read them.) Here’s what’s on our minds, our screens, and our night tables this weekend:

It’s been hard to read Fortune lately. It’s thin, the masthead continues to shrink, and too many times it seems like the strategy of the magazine is to replicate the gee-whiz attitude of its departed younger sibling Business 2.0. But the most recent issue has two fantastic pieces. In one, Steve Rattner’s The Auto Bailout: How We Did It, the head of the Obama Administration’s auto task force delivers a standard first-person tale, but Rattner is a former journalist, so his descriptions are particularly sharp. Here’s what he noted about the GM management style: “At GM’s Renaissance Center headquarters, the top brass were sequestered on the uppermost floor, behind locked and guarded glass doors. Executives housed on that floor had elevator cards that allowed them to descend to their private garage without stopping at any of the intervening floors (no mixing with the drones).”

Also in the current Fortune, Richard Siklos has another tale of management gone terrible awry, The Fight Over Michael’s Millions, with the Michael in question being the late singer Michael Jackson. It’s a tale of collossally bad money and talent decisions, the most poignant being the hiring of a $100,000-per-month personal physician. As Siklos concludes, “when it comes to the big financial questions, it’s a good bet that Jackson’s executors will not be asking themselves, ‘What would Michael do?’” (Disclosure: I’ve both edited and been edited by Siklos.)

Two recent pieces in The Economist deserve your attention, too. In Yum! Brands’ New Corporate Culture: Taking the Hill Less Climbed, the magazine reports on how the parent company, parent company of several second-tier U.S. fast food chains, is working with John O’Keefe, once a Procter & Gamble exec and now marketing himself as a “master of triangular thinking and triangular action” to advance the corporate culture.

Contrarians will appreciate last week’s The Three Habits of Highly Irritating Management Gurus, which applies a baseball bat to the theories of Stephen Covey. And if you have time for more on management consulting, perhaps like us you’re a few weeks behind on your stack of New Yorkers and you’re ready to read Jill Lepore’s Not So Fast, which considers how scientific management started as a way to work and has become a way of life. Turns out today’s GTD-style attempts to be as efficient as possible has a rich historical basis.

And finally, just off our night table is something that has been there for a long time and we’re relieved to have the space back: the 1,167-page Master of the Senate, the third volume of Robert Caro’s ongoing biography of Lyndon Johnson. There are many, many aspects of Johnson’s leadership style that were, frankly, repulsive, but Caro’s book describes, in what feels like subatomic detail, how the politician wielded power with sureness and ingenuity. It’s a fascinating, cautionary tale of how power is taken and managed. We’re not sure how many of our readers can commit to an 1,167-page bio, but almost every page has a vivid example of how an ambitious manager should — or shouldn’t — behave.

Back to reading …

Rita Gunther McGrath (Photo credit: Lisa Berg)

Why do established corporations’ new ventures often fail? The new issue of Business Insight, MIT Sloan Management Review’s collaboration with The Wall Street Journal, includes an interview with Rita Gunther McGrath about problems traditional business planning processes encounter when dealing with uncertain new ventures.

McGrath, an associate professor at Columbia Business School, explains that one pitfall is to “take the untested assumptions that underlie the [business] plan and treat them as facts” — and then make expensive business decisions based on those assumptions.

What’s the alternative? McGrath recommends writing down your assumptions when you write a business plan — so you remember what assumptions you made and can check them. Then figure out ways to test and evaluate your assumptions inexpensively as the business progresses.

Obama visited the MIT campus to deliver an address about American leadership on clean energy. In his speech about the topic, Obama evoked the pioneer history of the U.S., noting that the American people have always sought new frontiers. Todays’ pioneers, he suggested, include entrepreneurs, inventors and researchers.  As a nation, Obama said “we have always been about innovation. We have always been about discovery.”

Obama noted that the stimulus bill represented the largest single boost in scientific research  in history. He discussed the need to transform our energy system into one that’s far cleaner and more efficient – and said that transformation will be made as swiftly and carefully as possible. Obama said that the Pentagon has declared dependence on fossil fuels a security threat.

While you’re waiting for Obama’s address on sustainability to start, read our special report on the business of sustainability.

Our interest in the topic didn’t end when we published the report; we still aim to keep up with the latest in thinking about design thinking and share it with you. Here are three new books pushing the field forward:

The Design of Business: Why Design Thinking Is the Next Competitive Advantage by Roger Martin is a tough-minded elegant survey of why design thinking shouldn’t be considered some soft thing that’s nice for business at the edges but not necessary at the core. Martin is the dean of the Rotman School of Management at the University of Toronto (he’s written eloquently on why business schools need to change). His brief but comprehensive volume is full of examples from the usual suspects (Procter & Gamble, Cirque du Soleil, the folks who make BlackBerrys), but he finds new wrinkles in old stories and perspectives others have missed. If you ever thought analytical thinking alone was enough to run your business, Martin will set you straight. (For more, Martin summarizes his arguments in the current BusinessWeek.)

Thoughts on Interaction Design by Jon Kolko is an underground classic. It was published independently in 2007; its 1000-copy print run sold out quickly and photocopies have been passed around samizdat-style. Kolko is an associate creative director for the innovative consultancy frog design (the company also publishes one of our favorite interdisciplinary magazines, design mind). In this book, he collects essays (by himself and others) that capture the state of interaction design and give such designers, his primary audience, the tools necessary to explain the value of what they do to the businesspeople on your team. Managers: give yourself a competitive edge by knowing this before the designers on your team have to tell you.

Streams, Walls, and Feeds: 107 Design Guidelines for Improving Notifications, Messages, and Alerts Sent Through Social Networks and RSS by Janelle Estes, Amy Schade, and Jakob Nielsen is the most tactical of the three new volumes. The Nielsen Norman Group, which produced this report, is a leader in usability research and consulting; its reliance on original research is what makes it such a successful consultancy. In its latest report, the company evaluates how companies communicate via some of the most popular and cutting edge social media. As it usually does, Nielsen Norman finds most companies wanting. This report shows why satisfaction levels of most people who interact with companies via social networks are so low and what companies can do to improve them. The link at the beginning of this paragraph leads to a summary of the report. The full thing, 209 pages long, is expensive and outlined here. Like the other books here, it emphasizes how important design thinking is to maximizing your business operations.

When we reported on the BIF-5 Collaboration Innovation Summit earlier this month, we noted how struck we were by a comment from Saul Kaplan, the event’s “founder and chief catalyst,” who said “innovation requires a vulnerability most people are not comfortable with.” Vulnerability, the willingness to fail and to do so openly, should be a core competency for many leaders, but it is often taken as a sign of weakness.

That’s where the Washington Post video comes in. In it, Paul Schmitz, CEO of the nonprofit Public Allies, discusses how admitting to failings makes you a better leader, not a weaker one. (Warning: there is a brief ad at the beginning of the video.)

What do you think? How vulnerable should a leader be?