Rodney Johnson - Without Warning

My book Without Warning details the toxic nature of silent problems.  Possibly the most dangerous problems to solve.  Today from the New York Post comes a story titled, “Star Power Dimming At Some Street Firms” (I hate that title).  Here’s a brief caption of the story.

Some of Wall Street’s harshest analysts — and, as it turns out, most prescient — are discovering that there’s a steep price for being honest.  A growing number of analysts who were either critical of the financial sector or were early raisers of red flags in the mortgage market are getting the cold shoulder from their employers, which has led to the analysts being forced out or silenced. ..  Highly regarded mortgage analyst Laurie Goodman, who when she worked at UBS was one of the first researchers to sound the alarm about the dangers of the subprime market, is said to have drawn the ire of UBS brass as her clarion calls crimped the bank’s ability to sell billions in bonds backed by subprime loans. Goodman stopped publishing her 15-year-old weekly research studies in October and a month later left UBS to join boutique Austin, Texas-based firm Amherst Holdings as its research head.

As this story illustrates, problems at times are “Silenced,” which I refer to as Icebox Silent Problems.  These problems are being managed and controlled, which makes them extremely difficult to dislodge. From my perspective, this New York Post article is analagous to previous stories related to Enron, Worldcomm and others. The analysts that were screaming “Wolf” should have had their voices heard and heeded.  Instead, they were silenced.  The financial impact to you and me from this silence is staggering.

Note.  The book provides a process for getting your word out, when the individuals above you are holding you down.

An important component of every business is commonly thought to lie in the details. For many, this means - the numbers. Today, we find it important to rationalize everything in mathematical, scientific and linear terms. Society constructed this security blanket, thinking the scientific mind would protect us. So I conducted a quick Internet search with the words, “Numbers don’t lie, but.” Here are some of the gems I found.

*Numbers don’t lie, but… From whence do my figures come?
*Numbers don’t lie, but they don’t always reveal the truth.
*Numbers don’t lie. But when it comes to Internet rankings, they may not tell the whole truth.
*Numbers Don’t Lie, But They Certainly Can Mislead!
*Numbers don’t lie, but they don’t volunteer anything either.
*The numbers don’t lie, but they do conceal part of the truth.
*Everyone knows that numbers don’t lie. But interpretations of numbers? Now that’s a different matter.
*Numbers don’t lie, but liars manipulate numbers.
*As the saying goes, numbers don’t lie but you can use them to tell just about any story you want.
*As a compromise, maybe its true that the numbers don’t lie,but the words people use to describe the numbers do.
*There is the old adage that numbers don’t lie, but what if you are looking at the wrong numbers?
*Numbers don’t lie, but what is inferred from them is almost always a distortion.
*It’s often said that “Numbers don’t lie”, but in this case the numbers do lie.
*Numbers don’t lie but they sure can tell a good story.

Yes, there is a false sense of security in numbers. Do I need to mention Madoff, Stratford . . .

Risk is attached to far ranging elements from poor communication, to numbers that lie, to poor discision making…  Unfortunately, each is a silent problem with their own set of rules and peculiarities.  Beware…

In this economic recession, it seems like every day another story surfaces where another silent problem is exposed, and without warning.  These events place individuals, businesses and their livelihoods at stake.  Today a story surfaced over at Bloomberg about KIKO currency trading options ( knock-in/knock-out, or KIKO, options) that are popular in South Korea and around the globe.  The story states:

Growth skidded to a halt in mid-2008 — and not because orders dried up. Along with the rest of the Korean economy, Kumkang had been on a roll amid surging exports. The company’s crash came after the fallout from currency contracts that Choi signed with banks and now says he didn’t understand. In September, Kumkang filed for bankruptcy because of changing exchange rates and terms of the deals. In November, one bank closed the last of Choi’s contracts, costing him $15 million, half of his annual revenue last year.

A common denominator amongst these Without Warning stories is “Risk.”  In this story, a business leader was attempting to control risk, yet in reality he was being exposed to an even greater risk.  And just as few people saw the subprime crisis coming, it appears that noone foresaw the Korean won depreciating by 33% against the dollar.  Suddenly the risk they were attempting to control came with it an even greater risk, which they didn’t expect.  According to the article, 50,000 businesses around the globe are in a similar predicament. 

As economies claw their way out of this recession, discussions around Risk will be at the center of every organization.

I was listening to the radio this morning and heard a story of a town hall meeting in California that President Obama participated in.  The take away from the report.  Amongst all of the furor over AIG bonuses in recent days, the question was never raised.  The conclusion, people were more concerned about the bigger picture relative to the state of the economy, and the AIG bonus story wasn’t all that important.

While I respect the President’s decision, I’m concerned he’s  being irrationally rational. In the book Without Warning, it discusses how problems become silent.  One of the paths to problem silence is that given enougn time, it will just fade away. However, we must realize that what occurred at AIG is likely part of a bigger problem, and similar stories will continue to surface until the system is fixed. 

And here’s my recommendation to the President.  Beware of the Silent Problems that are lurking around the corner.  Just because you can’t see or hear them, doesn’t mean they don’t exist.  And if they aren’t dealt with proactively, they will impact you reactively.