So, a few Wall Street investment banks such as Lehman Brothers, the world’s largest insurer and 18th biggest company in the world, AIG, Alan Greenspan, Northern Rock, the largest mortgage and private savings provider in the UK, HBOS, and the country of Iceland are history. By history, I of course mean that they are gone. Well, not literally. By gone I mean that they do not exist in our minds, in financial districts, and pockets like they did before. However, they are all still physically there, so all is not lost. But we have all gone from subprime mortgage crisis to credit crunch to credit crisis to full meltdown. How did this happen? What now for leadership? Surely, we should not look for it among our leaders?
Text of Credit Crunch Leadership From Below
1. 7 Reasons Why the Credit Crisis calls for Leadership from Below Trond Arne Undheim, Ph.D. & Author Slideshare Credit Crisis in 30 Slides Contest 24 October 2008 The opinions expressed here are the authors only and do not necessarily represent those of his employers past or present.
2. Why are we discussing this?
Investment bank Lehman Brothers, the worlds largest insurer AIG, Alan Greenspan, Northern Rock, the largest mortgage provider in the UK, HBOS, and the country of Iceland are history.
By history, I of course mean that they are gone. Well, not literally. By gone I mean that they do not exist in our minds, in financial districts, and pockets like they did before.
What now for leadership? Surely, we should not look for it among our leaders?
3. Find the guilty party!
4. 1. From blame to trust
Individual investment decisions and the globalization of risk contributedbut.
Credit crisis is essentially leadership crisis.
5. but what is trust?
Credit is only given when there is trust. Trust is an intangible bond between actors in a market.
While all market actors contribute to the overall trust of the market itself, leaders have traditionally been thought of as responsible if havoc occurs. Thus, we have seen calls for executives to resign and for Heads of State to act. But are they? And does that create trust?
6. Trust is a game!
Trust, unfortunately is a game, too. Trust is a gamble, a calculated risk.
You cannot always know. So, while blame might be a necessary exercise, it will not solve the trust issue.
Trusting less will not solve it either. Neither will risking less.
But the understanding of what trust is, will.
7. 2. From trust in the market to trust in people
In reality, the credit crisis happened because we the market consumers financial actors - everyone put our trust in the idea that there was something abstract, rational, even holy called the market, an invisible hand that pushed everything forward. We woke up to discover it was only us.
8. People architect markets
According to a New York Times article yesterday even Alan Greenspan has conceded to the House Committee on Oversight and Government Reform that he has misunderstood the way markets work. In reality, markets are always built by people. In The Architecture of Markets, brilliant UC Berkeley sociologist Neil Fliegstein made that point already in 2001:
markets are social constructions that require
extensive institutional support.
9. Products cannot be trusted
People create trust. Products are the results of that trust, but they cannot themselves be trusted. You can only trust a product from people you trust.
The credit crisis happened because too many trusted the products, trends, graphs, institutions, and technologies that were sustaining the growth cycle. Nobody stopped to ask: who is behind this, can I trust him or her?
10. 3. From power to responsibility
The credit crisis is a crisis of power. We can no longer trust the powers we did before. We read stories of people who walk down to their bank and scream at their personal banker for being incompetent. They vent long pent up anger at the system that made them feel powerless, weak, insignificant and incompetent. Instead, we want responsibility.
11. Responsibility is power
We want corporate bonuses to be cut in banks who have received rescue packages. Not because we envy bankers per se. We do, but that is another question. No, the bonus is paid out within a rationale of power as opposed to a rationale of responsibility. With power comes great responsibility, the adage goes. Now we can say with resonance, sanctioned by the State, which represents us all: with responsibility comes power.
12. 4. From top-down to bottom-up
The traditional top-down leadership model is based on the Weberian notion of legal-rational authority, power vested in people who possess positions of power irrespective of that persons personal qualities.
Weber also wrote about two other types of power, the charismatic and the traditional, where the quick examples would be Hitler and the Pope. Charismatic power is sustained by a convincing, overwhelmingly vibrant personality.
13. Bottom-up legitimate power
Leaving aside coercion, which Weber snuffed at, since it had no legitimacy in his eyes, what Weber from his 18th century perspective was unable to conceive of is a fourth source of power, which I in my eponymous management book from 2008 call leadership from below.
Where does its legitimacy come from? From the very relationships that sustain it.
14. 5. From networking to Zen
Rather than network power in the sense of who you know in a powerful position or who can recommend you or your actions, leadership from below is not manipulative.
It actually emanates from the social bond that is created between individuals who work together.
Japanese philosophy, more specifically the scholar Kitaro Nishida, speaks of this force as Ba, an indigenous word for shared social space, which can only happen between trusting people.
15. Technologies belong to people
The contemporary market actor also seems to trust things, techniques, and trends. The problem with this kind of extension is that it introduces an element of unpredictability. Yes, technologies have effects of their own, but mostly the effects that people want it to have.
Technologies have built-in designs that act like compulsory manuscripts. You cannot avoid them if you want to use them.
16. Zen means balance
The popular term for spiritual balance among alternatively minded westerners is Zen.
You can not manipulate networks to create Zen. Balance fosters balance. There is give and take.
17. 6. From clubs to the piazza
Governments now have significant ownership in banks, this can actually be fruitful.
It will serve to re-focus peoples attention on what a market is, and how trust can, should and should not be created.
Large, unhampered markets cannot continue to allow the exchange of complex club goods. If they do, they fail.
18. The piazza is free for all
Leadership From Below is the perspective that, no matter where you come from, what you bring to the table must always be judged by the people present.
The situation is what counts. Past and future is not relevant to leadership carried out in present.
Whatever problem presents itself must have a solution there and then.
Power of now is stronger than power of later.
19. The piazza has stakeholders
The now must be accessible to all. We cannot bury important financial decisions in financial lingo.
Simplicity is king. Time to resurrect the Italian piazza where things are openly discussed.
As Neil Fliegstein writes about markets and firms, shareholders are not the only stakeholders.
20. 7. From positions to attitude
While not necessarily implying that powerful leaders cannot practice bottom-up leadership, Leadership From Below introduces a certain modesty. You can never be sure to be the leader. The group will always make up their own mind.
You may enter a situation with a good chance to influence others. But if you dont, you cannot blame a weak negotiating position.
Positions are created, and need to be sustained every time. Its all in the attitude. Spin that!
21. Find new leaders
22. Leaders are everywhere
My two-year old knows a thing or two about best practice