What We Do, A History — Part II

September 7th, 2006

Growing up in the middle suited me for crisis work. Getting dumped in the lowest academic groups suited me for my clients. They are small business, so too in the lowest group, and not just as a measurement of gross sales. The assignment is prejudicial. The assumption that skill, accomplishment, character and action must always take exactly the same form is blinding. Because the form of small business is different than large, the owners get dumped to the lowest group. I tried not to take that personally. It is the owner’s problem; I wind up taking it personally. The prejudice is deeply rooted and most evident in crises. Yet it is not often malicious in intent, so it is susceptible to provocation and deflection by the rhetorical command of facts.

On four occasions I hired marketing firms to put words to what I do. The first three described what I should become. One of them thought I had to present a happy, warm friendly face. Sure, that makes sense when almost all my work was fighting with owners in to prepare to fight successfully for them. There are no happy faces in workouts, turnarounds, splits, expansions, acquisitions, sales and startups. Those come only after you have won.

I hired the fourth firm because I thought they would know. I had advised them on a major crisis—navigated them successfully through it. When it was over one executive told me she had thought hiring me was a mistake. “You’re just an accountant.” She said she was wrong about me: what I did according to her was genius. Gee, l loved that–from class dunce to applause.

Alas, their advice was to take the prospect through “step-wise”–not a single word that reflected insight into what we did in their crisis.

Suppose you do what I do. Wouldn’t you suppose that your client is smart, at least on the argument that the customer is always right? Wouldn’t you suppose the owner has already tried customary form and found it wanting? And, since they are at your door, wouldn’t you look beyond accepted forms for solutions?

In crisis I react to the personal offense coming from a prejudice against small company owners. It took time for skill to be added to my umbrage, years to realize that the problem with what is normal and conventional was that it missed the gaps. What we know, what we are taught, what constitutes the state of present knowledge should not be a limit, but the ground from which what is not known can be found. There is nothing wrong with what is ordinarily true, even in business; there is a lot right. We always check what we see against normal and do so rigorously. But to mark a thing as lowest because it is not normal, not the way it should be done and then assign to some ignoble heap is non-sense. What is different threatens, but so does progress.

It is these gaps that interest me. They suit human curiosity, the driving urge to find out why. They were, I see now, the nature of my grandmother’s contrariness. Why is like a plague, a chronic disease. It keeps posing the question. It led me to a question that in one type of crisis to another kept coming up: why was it that owners and others involved were blindsided by the crisis? Oh, they said they knew, but their assertion is disputed by their inaction.

When small businesses are troubled the accepted wisdom states it is for reasons of deficient capital and management. But I could not see enough difference between those on whom trouble fell and those on whom it didn’t. Maybe it was just a few examples that exposed the gaps in accepted wisdom.

It was in those few examples that I fit another piece of the puzzle. I saw smart, motivated people get blindsided. Years ago First Bank–doing what they knew, very smart, and surely cautious–got blindsided. I know because I happened to have timed an investment in their stock right. It was this combination of blindsiding of smart people and timing that lead me to a conscious recognition of the role economics in my work.

I read quite a lot. Increasingly I read economic theory. It started to fill the gaps for me. It explained why what I had done intuitively had worked. This time the gap was not so much using what is known to find what is not. It was confirming and adding to my own knowledge gap. Economics is a lot of math and models, but I want to shift your mind a bit on economics.

Economics is a branch of social sciences. It deals with, it explores, how people act in economic decisions. Risk, uncertainty, timing, future, status, reputation all play into it. What I saw was like a light shining back into my past.

The study of economics came about when a few very smart people noticed that good short-term decisions were often terrible in the long-term. It became clear that in addition to failing to ask why, following proper form left the decision makers too sensitive to the short-term, setting up a terrible long term. Nobody is sure of the future, and many are all too sure about the present. That leads to things like bubble and bursts. It leads to holding onto what no longer works because it once worked. It leads to good form and bad results.

That gap between what is and what will be is economics. It accounted for people’s being blindsided. But just as fully as unseen gaps create risk, the dead certainty of gaps delivers advantage.

I’ll attempt to tie this all back to education. The problem with education–how it is taken, if not how its taught–is that it becomes the limit of what a person can know rather than the ground from which to reach for what is not yet known. Reaching is the precursor to progress. Those who do not fit the form may be intellectually deficient. Ah, but they may–and I think more likely–are those who see something more, something beyond. And that is the potential, the promise and the possibility of any small business owner.

I can’t resist a metaphor from the Maginot Line. It has been soundly criticized for its failure. It was also the best possible thinking–if you will, form–of its time. The problem was that its achievement was seen as the limit of possibility, when it should have been seen, and could have by the eye of humility, for what it was. It was both opportunity and an unheard warning to look for the gap. The Maginot Line is like best of business management and its inevitable gap in economic knowledge. Economics are unconsciously practiced by the entrepreneur for opportunity. It is so that that the entrepreneur’s economic practices are also limited to their own opinion about a narrow slice of the future.

Alas, I am not a genius.