Random Thoughts: Day 15 – Wednesday Sept 22nd 2010

It is interesting how different people view the same content - what I thought was a fantastic lecture yesterday by Michael Porter was seen by some people as boring. I was quite taken aback by this - one possible reason is the overload of work - can you beleive that there were people desperately trying to keep their eyes open during the lecture.

Isn't it amazing that many people all over the world would give an arm and a leg to listen to Michael Porter and here are a bunch of high performing, high achievement oriented and successful executives, who felt the session was boring.

Anyway, back to classes. Today we have three sessions, starting with Russia. Prof. Vietor was his usual gregarious self and it amazes me as to how he remembers all the exhibits, which contains historical national GDP and growth related date. I was getting confused between data from different countries. Russia, after Gorbachev is very different from what we have heard through the media - which in many occassions is very biased. Here are some points which I noted:

The switch from communism to capitalism and back to communism is probably the greatest social experiment of history in the world.
Russia's "big bang" approach of switching to capitalism followed the model adopted successfullly by Poland a few years back
In 1990, Jeffrey Sachs advised the Polish government to use the big bang approach or shock therapy to break from communism. It is rumoured that USA gave a $1 billion to Poland in the process - what happenned was after initial economic shortages and inflation, prices in Poland eventually stabilized.
When President Yeltsin was attempting to change Russia, Jeffery Sachs and Harvard economist Andrei Shleifer advised Yeltsin to take a similar approach to what was done in POland. USA refused to help and without the money needed Russia fell into chaos. Sachs resigned immediately afterwards and it is rumoured that Dick Cheney was the hawk in the US government who did not want to help Russia

There was a good discussion what are the variable one should use while analyzing states. Most scholars now use three variables to assess states - State Autonomy, State capacity, Legitimacy. These three concepts define the relation between public authority and society.

Looks confusing ? Actually it isnt. Autonomy describes the independence of state institutions from society. Capacity is the ability and effectiveness of the state to perform its basic political and economic functions. Legitimacy is about society's belief in the state and its leaders.

As Russia, with its proud history and people was struggling, George Bush Sr could have helped, but did not, though there was no threat to the US. In our class, one participant who worked for 21 years as a nuclear submarine officer, commented : " it was sad to see a proud state with world class navy falling apart.". That statement summarize it all.

I used to think that Gorbachev did a lot for Russia, as he was the guy who started off this process. But both in the class and in the case study, I did not get the feeling. And now from an external view, it looks as though Putin and Medvedev seem to be putting things in place, but internally it is a group of people including these two, who are controlling the whole country.

The second session by Prof Tushman was about clash of values and high performance. WHat is commonly seen on high culture organizations. WHat do you do when you have a very ambitious individual breaks all records on achievement, but in the process violates the company culture and ticks off many people in the process. WHat seems as a open and shut case to me, is actually not. The boss of this individual is at fault as well, for not giving feedback early on. The motto should be : " build the business and live the culture". And in situations like this, all employees are watching to see how leaders respond to such cases.

How to handle clash of performance and alignment to values can be best described by the diagram below:

The last session was on the global financial crisis and the players involved in this. This session was fascinating in view of the complexity of the issue on hand and the involvement of so many players. In a way after a while, everyone know that this was a mess but did not know how to get off this runaway train ! The root cause in my view is the concept of tranches, which killed the CDO's. In which a single tranche of BBB rating, is split into four or five tranches, with almost 90% of it getting a rating above the original rating of BBB. And the rating agencies are the core to this - who are they ? Moody, S&P and Fitch among others. One other issue for the rating agencies was this : it was too difficult to rate some of these complex products effectively. But the business coming by was too easy to be passed up. the McGraw Hill CEO said, "if the market wants these kinds of products and the institutional investors want those products, then we move with the market and we're going to rate whatever." This sums it all !

After a heavy dose of what greed and hunger for business can do to the global economy, it was time for some joy - a group photograph of all the AMPers - all 170 of us formally dressed. After which the living groups also had their own photos taken.

Went to play tennins after this, with Bart, Richard and Dave. Had good fun, with Bart and Richard playing against Dave and myself. In the words of Bart, they had the greatest comeback of all times ! Leading 5-2 and 40-0, I missed a sitter of a volley two feet from the net. And as the saying goes, the rest is history - they won 7-5. Weather was fantastic for a good game of tennis.

Some photos of the living group and our tennis team below. More later .....