Graziadio Business Report Blog

Joseph Lee

November 19th is management pioneer (now deceased) Peter Drucker’s 100^th birthday. To celebrate the life and teachings of this remarkable man, the Drucker Institute hosted a weeklong event, Drucker Week, featuring some of the most respected business academicians (a paradox?) of the world at Claremont University.

Ken Blanchard (author of The One-Minute Manager and Know Can Do!) was there, along with Warren Bennis (author of Judgment), Stephen Covey (author of The 7 Habits of Highly Effective People), Charles Handy (author of The Gods of Management and Myself and Other More Important Matters, Frances Hesselbein (co-editor of the Drucker Foundation’s three-volume Future Series and Leading Beyond the Walls, and Jim Collins (author of Good to Great)—real heavyweights.

Here is a short account of my experiences attending this notable event:

On Tuesday, November 4^th, Ken, Warren, and Charles entertained a downtown Los Angeles crowd at Club Nokia. Ken spoke of the need for the servant leader—someone willing to put himself at the bottom of the organization chart (an upside down pyramid)—to support those closest to the customers. After all, as Peter Drucker said, the only purpose of a business is to create a customer. Continue reading ‘Peter Drucker, Masatoshi Ito, and In-N-Out Burger’

(Left to Right: Roberta Romero (Drucker), Jenny Sheng, Tanya Stevens, Candace Olfati (all CGU/Keck Graduate Institute), Joyce Zhang, Sirish Upadhyay (both Graziadio), Henry Du (Drucker), Jaya Soedradjat (Graziadio), Me)

On May 2nd, the world gathered in Omaha, Nebraska to listen to Warren Buffet at the 2009 Berkshire Hathaway Shareholder Meeting. We tried to parse the future from his words, and wondered if this was the most optimistic that Charlie (Vice Chairman of Berkshire Hathaway Corporation) has ever been. Some hailed the new format as much more focused, giving the audience a better chance to understand the genius of Warren Buffet.

Two days later, the market reacted with the Dow posting a 200+ point advance. And since Warren doesn’t really care about the market, let’s just say that the reviews have been uniformly—cautiously—optimistic.

This year, I attended the meeting with 7 students and recent graduates from the Peter F. Drucker and Masatoshi Ito Graduate School of Management, the Keck Graduate Institute, and Pepperdine’s Graziadio School of Management. I teach as an adjunct professor at Drucker and the Graziadio School and it was a delight to be joined by a group of delightful, energetic, and bright leaders of our future.

I’ll try to avoid the usual reporting (you can read several media reports on what was said during the meeting), but here are some of the my takeaways: Continue reading ‘Impressions from the 2009 Berkshire Hathaway Shareholder Meeting’

Times are tough. The demand has never been greater for regulatory oversight. Public outcry to punish those who failed us has reached the ears of our leaders and politicians.

The dismissal of GM’s chief by the Obama Administration was a shock and a signal to the automotive sector: This is a time in which risk taking will no longer be tolerated. We must learn to play it safe.

Or not. Continue reading ‘Experimentation, Risk Management, and Breakthrough Performance’

If you were anywhere near Dodger Stadium on March 23 for the World Baseball Classic (WBC) finals, you heard the drums and the thunder sticks of 45,000 South Korean fans drowning out the 5,000 Japanese fans—not to mention the 4,816 Americans there just to watch a good ball game. And a good ball game it was, a nail biter ending in the 10th inning when global superstar Ichiro Suzuki (Japan) singled home the two winning runs.

ESPN broadcast the game with expert commentary and the dialogue shifted toward Team USA—why weren’t they in the finals? And what can Major League Baseball (MLB) do to change the attitude of the team owners who refused to part with their best players during the spring?

“It’s our egos that refuse to believe that anything coming from a foreign country can be better than our own,” sports commentator Steve Phillips claimed during a previous game. His colleague Orel Hersheiser responded, “I wouldn’t call it that. It’s just that we have different priorities.”

Or maybe it’s as commentator Joe Morgan said: Hey, this WBC stuff is great, but it’s just an exhibition. Meanwhile, down on the field, the Korean base stealer slid into second base head-first coming up with a cracked helmet and a splitting headache. Just an exhibition game indeed.

In that earlier game, the announcer asked Orel if he had had a chance to pitch for the USA in the WBC during his MLB days, would he do it? When Orel answered, “No,” the announcer probably wished he had some of those thunder sticks to drown out the silence in the booth.

A Corporate Culture of Self Interest

In business, we throw around the word “corporate culture” like it is the magical explanation for anything organizational that we don’t understand.

“AIG had a culture of corruption.” “Citigroup had a culture of overspending.” “Lehman Brothers had a culture of taking unnecessary risks.”

Today, we live in a real-world corporate culture of self interest, and nowhere is it more obvious than on Wall Street.

Continue reading ‘The World Baseball Classic, Corporate Culture, and Short-Sightedness’

Joseph Lee

First, there’s the obvious reason: It’s the sheer scale. The total value of the US residential market hovers around $20 trillion. There simply isn’t anything close to it (add up all the cars in the US—maybe 250 million—and give each an average value of $10,000 (8+ years median age), and you only get about $2.5 trillion). The home is the single largest purchase any American will make in his/her life time.

But the reason residential real estate (and real estate in general) drives people crazy is for the less obvious reasons.

Unlike other products in the market, real estate is impacted much more severely by supply (than demand). Why? Because it is immovable.

Once real estate—residential, commercial, hotel, or retail—is placed in service, it cannot be packed up and moved to a different location if the “market isn’t there.” It must sit, wait, and perhaps be repackaged, but it will never be relocated.

In the 1980s, when I ran hotel market studies, we measured demand by counting occupied room nights. But that was simply a measure of how filled the hotels were. Imagine if McDonalds measured its own performance based on how many hamburgers were sold out of the ones they made.

Every day, they make the same billion, and every day, a different number is sold. A lot of waste, isn’t it? That’s real estate.

Continue reading ‘Why Real Estate Matters’

Joseph Lee

In the 1979 motion picture Being There, Peter Sellers played Chance the Gardener, a man said to be “stuffed with rice pudding between the ears.” Nevertheless, it was Chance who offered a piece of brilliant advice that would serve the President of the United States well in our current state of economic crisis:

“…as long as the roots are not severed, all is well, and all will be well… in the garden.”

Last month, I sat in an economic forecasting dinner where professors from a famous business school predicted that the economy should be turning around by mid-summer, and that by the end of 2009, a recovery should be in full swing. (Read why a recovery may not be so soon in coming) Then there was Anderson Cooper on CNN tonight asking another economist whether we’re in a depression. What ties these people together is that none of them have any idea what the future holds. So why do we bother listening?

There really is little magic in understanding why we’re in a mess today and what it’ll take to get out of it. We’re in a mess because we lost confidence in the system (rightfully so), and in order to get out, the consumers need to feel confident again. Nowhere in the solution does reality matter. Reality is that current home prices are as affordable as they’ve ever been in the last 30 years. Reality is that sooner or later, people will need to buy new cars, replace furniture, fix up their homes, or get the latest fashion. Reality is that relatives need to be visited (even those you hate, especially if they have money), nails must be polished, family vacations taken, and graduation gifts gifted. Continue reading ‘Are the Roots of the US Economy Irreparably Severed?’

Joseph Lee

Barack Obama swept into the nation’s capitol, and with a few scribbles of his name, started the process of dismantling eight years of Bush policies. He faces a Congress that will largely embrace his changes, mostly because the Democrats have a comfortable majority in the House and only a 2-seat deficit to get to the filibuster proof super majority in the Senate. The economic stimulus package was passed after a hard fought battle. Washington will get its change.

The news from the business world continues to disappoint, but perhaps most surprising is not that the economy is tanking, but the fact that even in these tough times (or perhaps because the times are tough), we discover Madoff’s brazen $50 billion ponzi-scheme, the $1 million renovation of Merrill Lynch’s CEO Office, or the $18 billion of bonuses paid to managers of those very financial institutions that are begging for bail-out funds. Obama instituted a $500,000 max on executives from companies that receive bail-out funds, but it just seems business executives simply “don’t get it.”

Actually, they do get it. The truth is that self interest is the surest way to get ahead in our society. Business leaders simply follow in the footsteps of their bosses, and those bosses are the ones that have shown the rest how to rig the system in their own favor. Board members, even outside directors, are executives of companies who do not want their boards to clamp down on their own compensation packages—it is simply not in their self interest.

Continue reading ‘Why Change Happens in Politics–NOT in Business’