Rick Andrade – Where CEOs Can Make Better Decisions

As published by Rick Andrade – CEOWORLD Magazine

If you haven’t been keeping up on the day-to-day developments in 2024, this year may be one to remember.

America is facing an historic point of inflection. Social media is tipping the balance in favor of the many voices collectively at odds with the status quo. There’s no one group. They hail from all walks. They are the American workforce. Remember them?

Call it A.I., call it a post-covid back-to-office worker recall, call it cost-savings, call it “the year of efficiency,” call it a response to a murky 2024 economic outlook, there’s no over-looking the headlines:

Massive worker layoffs from dozens of companies are sending seismic shockwaves across the entire American labor landscape, especially well-educated workers, where confidence is low.

It’s not like they can’t find work, they can if they lower their expectations, especially college grads who struggle to land a job that pays the bills and their student loans. It’s more about not loving the job you have and not trusting your employers to have your best interests in the plan.

Did you know that the number of unhappy dissatisfied Americans according to a 2023 Gallop survey is near a record high?

A whopping 80% of Americans are “dissatisfied” with the way things are going in the US right now. Add to this growing voice of malcontents a cocpahopny of other dismal headlines and the message is front page bold font; It’s not working!

Meanwhile social media is busy reminding us every day of exactly what’s wrong. The increasing homeless rate in America is off the charts, home ownership is a distant dream for young people, everything costs more, food, rent, gas, utilities, car payments, insurance, and interest rates at benchmark highs. Consumers now carry more than $1 Trillion in credit card debt, a new all-time record.

According to Reality Check: The Paycheck-To-Paycheck Report, 50% of consumers live paycheck to paycheck, and 70% of consumers have less than $15,000 in savings, many have less than $1,000. Moreover, our national debt is now 120% of our GDP, our cities are falling apart, and we’re more divided politically and financially en mass from one another than ever before it seems.

Heard any of this rant before?

Enter social scientist historian and author Peter Turchin who begged the question; Does history rhyme or repeat itself?

In his most recent book, End Times: Elites, Counter-Elites, and the Path of Political Disintegration (2023), Turchin, professor of social dynamics at the University of Connecticut analyzes the causes and consequences of social and political instability in the United States and other countries over the arc of time. He argues that the main drivers of this instability are the “elite overproduction” aka too many college grads, the marginalization of worker wages and consequential accumulation of profits by the rich at the expense of the working class.

Citing historical patterns whereby societal “elites” so engorge themselves with riches and social power they cause the societies they control to revolt, and tear the house down. Over and over whenever, wherever elite factions form the outcome for the “common man” is the same, gloomy.

And yet, while the symptoms of mass discontent and societal distress are everywhere lately, the “elites” don’t seem to mind it much.

So, who are these elites? Am I an elite? Are you?

It may surprise you but the elites are not all the latte-sipping, BMW-driving, monied rich people clogging the drive-thru. Elites are select members of society that control the 4 key pillars of power: military, economic, political and ideological.

Elites control and/or influence each of these pillars to protect, concentrate and funnel the flow of profits and power to themselves, Turchin outlines. And more starkly, they will do whatever it takes to keep it that way, resulting in clashes between themselves and with the rest of us.

Whether you agree or not Turchin puts up a good fight. His tracking data includes 300 historic case studies fed through a scientific model looking for patterns, which is exactly what machine learning does to help predict things. In this case the prediction is not good. It appears that like the boom and bust of the business cycle, human societies have them as well.

Unfortunately, Turchin concludes America and much of the world population is stressed out, and signs are evident he notes that many societies are approaching another end time in their current social cycle and looking for dramatic change.

So, are we headed for imminent collapse? American big cities could be, homeless in Modesto, CA now live in caves! News video you have to see to believe.

But if you’re a born skeptic, Turchin lays it out for you:

“When a state, such as the United States, has stagnating or declining real wages, a growing gap between rich and poor, overproduction of young graduates with advanced degrees, declining public trust, and exploding public debt, these seemingly disparate social indicators are actually indicators of looming political instability.”

Ok. So why should we care?

·        The American Revolution (1776)

·        The French Revolution (1789)

·        The American Civil War (1861)

·        The Russian Revolution (1917)

·        The Chinese Revolution (1949)

·        The Iranian Revolution (1979)

Get the idea? And what’s more, each of these major disruptions had a “trigger” event. Which is how most uprisings start.

You’ll remember:

·        The Boston Tea Party (1773)

·        The Storming of the Bastille (1789)

· The Bombardment of Fort Sumter (1861)

·        The Easter Monday Rising (1916)

·        The Fall of the Berlin Wall (1989)

Each event had a common thread. Unhappy disaffected marginalized groups, mostly middle and lower working-class earners and families who felt then as they do now reason to join and embrace the contemporary cries of the unheard “common man.”

Combined with other disaffected groups they together form a united front dead set on tossing out the old bastards and ushering in anything new, as long as it’s different.

Unfortunately, change for the better rooted and stemmed from a raw emotionally-driven compulsively kinetic force for change doesn’t always end well either. Caveat emptor as was the case in Nazi Germany, Soviet Russia and a host of other communist and fascist-run countries last century.

Still here we are again, walking along a well punctuated historic precipice in the dark and asking; How close to the edge are we, anybody know?

Well let me tell you, Turchin warns, we are once more in a “pre-revolutionary stage” in America he says.

“When the equilibrium between ruling elites and the majority tips too far in favor of elites, political instability is all but inevitable. As income inequality surges and prosperity flows disproportionately into the hands of the elites, the common people suffer, and society-wide efforts to become an elite grow ever more frenzied.”

Frenzied? You mean despite all the seemingly good “macro” economic news such as historically low unemployment, millions of open jobs and record-high stock market levels, there’s still something under the bed?

Current macro measures don’t tell the whole story, they tend to mask and distract from it. I love it when my IRA goes up, and isn’t that the whole point?

Since 1950 the S&P 500 stock index grew from 17 points to more than 5,000 in the 73 years since, that’s a cool 29,000% rise, and a pathway to wealth, if you owned stocks.

Meanwhile America’s birthrate is half what it was in 1950, and the wealth divide is a disturbing gulf-so wide that by any measuring tool you can’t see the other side. And it’s not going unnoticed. Younger workers are asking; what’s in it for me? Who am I in this profit-driven machine? Why am I doing this?

And elites should take note. Facebook, Instagram and TikTok are each brimming with video testimonials of laid-off workers and disaffected often homeless American citizens who cannot make ends meet in our current economic system. And they are garnering millions of “likes and views.”

So, what do we say to them? Work harder?

In 2023 the top 10% of Americans owned 66% of all household assets. By contrast, the lowest 50% of Americans owned just 2.6% of total assets. Yikes! I hope nobody reads that. Which means most of us work just to live day to day, have little savings and own next to nothing. And regardless of the why, to these Americans it altogether sounds a lot more like living under the hand-outs of an elite Oligarchy than a free market Democracy.

But don’t such things in America always ‘regress to the mean’ as they say, come back down from the frenzied froth and fix themselves over time?

No. Because as the wealth gap grows wider and elites continue to restrict who can enter the golden realm, social media readily feeds the frenzied up-and-coming worker bee a cold dish of the American Dream. Call them what you may, but unless things change Turchin argues we’re doomed to repeat history.

Meanwhile, given the course of western capitalism up to now a massive reset may be unstoppable. All we need to repeat history the data reveals is a “trigger event.”

A trigger event is any act that so outrages the masses they riot and protest, aka revolution, which is exactly what you never want to see. But it happens, again and again.

Like the Farmer rebellion happening now in Europe blocking streets with hundreds of tractors and farm equipment there to protest higher input costs, new Green Deal carbon taxes, and cheaper food import prices, all conspiring to drive them out of business they say. Regardless of who’s at fault, they blame their government, and their anger is real.

Back home we face several of our own trigger events. Would any of these surprise you?

·        A precipitous decline of big city law and order causes riots?

·        A massive un-timely layoff cohort that results in violent protests?

·        A nationwide backlash against immigrants resulting in military closure of the southern border?

·        A divisive and contested national election outcome redux?

And let’s not forget the newest, biggest bad Daddy of the them all – Artificial Intelligence.

Maybe artificial Intelligence is the final straw that breaks the camel’s back. [read my article A.I.- It’s Altogether Insane]. There are frightening developments.

Just this past week another devastating blow to the minions. Have you seen OpenAI’s new Sora text-to-video diffusion model? Sora can replicate realistic movie-quality videos of any imagination from a single line of descriptive text prompt in minutes. It’s a stunning new capability. Especially for the 1000s of digital artists, graphic designers, game designers, animators, photographers, editors and ad agency production crews who all find themselves staring at Sora’s videos eyes-wide, jaws-dropped and newly unemployed.

If AI technology does increase productivity as promised and eliminates swaths of human labor cognitive skillsets and talent as expected, a collective mass of millions of unemployed and under-skilled workers could be on the streets, very angry, and very determined to get back at the system that let them down.

According to Turchin’s recent article “When A.I. Comes for the Elites” he discusses how the A.I. revolution will affect the social power dynamics and the stability of societies. He argues that A.I. will create new challenges and opportunities for both the elites and the counter-elites, and that we need to develop a new social contract that can accommodate the changes brought on by A.I.

So, I got to thinking. A new social contract? Is it possible?

What if maybe… ahead of a radical profound violent trigger event to force profound changes, ‘We the people’ do hereby request business, government, educators and all Americans to come together to outline, plan and implement a rebalancing approach to capitalism that can encourage profits, but without the abrupt workforce-obliterating downsides of our free market system? Something better, and something big.

1933 FDR did something big. He introduced the ‘New Deal’ to America, a line from an election speech to the “forgotten man.” It wasn’t just one deal; it was a series of programs designed foremost to help the whopping 25% of unemployed citizens eat and find work during the Great Depression.

As it turned out despite the substantial tax increases, over the decade the New Deal did help America recover from the Depression. Without it the US economy may have collapsed, plunging our country into utter chaos and anarchy at the very threshold of World War II.

Instead, the New Deal in America was likely the single most important social reform at the right time and place to shape our great country and the future of all civilization.

The New Deal had a significant impact on the role of a federal government in American society, as it expanded its unprecedented authority and responsibility in regulating the economy by providing social welfare safety nets and promoting infrastructure development (aka: jobs).

And, let’s not forget the New Deal created four super key programs that America still relies on today:

·        Social Security

·        The national minimum wage

·        The SEC

·        The FDIC

They’re not perfect, but they were revolutionary at the time for us. Today they exist as cornerstones under our Constitution armed to protect citizens from the crippling side effects of unbridled capitalism. Which may be what we need to right the ship.

Despite the cynical distrust of big US government programs then and now, like it or not the New Deal did prove the US government could create, regulate, borrow, invest and spend on national interests including programs that got the unemployed compensated and eventually back to work, and not toward a revolution.

So. Why not another New Deal?

With a committed and focused team in Washington, We the People, can embark on the same ambitious plan and vision FDR had 90 years ago, and do it without another Revolution or a Depression.

Critics cry foul. They say any massive social reform like a New Deal would put America on a slippery slope to EU-style Socialism, right?

No. But a New Deal would require us to effectively dismantle decades of elite influences and power controls in place now. Which goes beyond government accountability alone. Because it’s not the 1930s.

This time it’s corporate America’s turn to step up and get on board.

American corporations and all employers including federal, state and local governments have become the mother’s milk of American civilian life. They are our de facto caretakers of the American working class. They control wages, healthcare, the environment, and the growth, prosperity or decline of many U.S. cities. The history of American companies moving our manufacturing base offshore chasing profits under the mantle of globalization 30 years ago is still a pile of rubble in many parts of our country. But times change, and so do people!

Turchin proposes the ultimate pipe-dream, some possible solutions to rebalance and restore our economic and social fabric. The outline of a New Deal, with not the intention to restrict profits per se, but rather how they are distributed. What do you think – can we:

·        Reduce the inequality gap by implementing progressive taxation and eliminating corporate loopholes

·        Increase social spending and promote more economic democracy

·        Reform the political system by limiting the influence of money and special interests

·        Increase representation and participation of the people in politics, not the money

·        Foster a common national identity, teach students the importance of being American

·        Require corporations to ramp up E.S.G., such as paying fair wages and taxes, investing in human capital re-training and innovation, supporting social and environmental causes, and becoming certified Benefit Corporations

·        Create new public assets by establishing sovereign wealth funds, digital dividends, or UBI: universal basic income, such that the benefits of economic growth and technological innovation can be more widely shared with all citizens

Sounds like a radical social rethink to me. And maybe it’s time. Do we have a choice?

Unfortunately, neither Congress nor the corner office is ready to embrace such sweeping reforms. Remember these are the elites. Their collective understanding of the issues must work to preserve the status quo, the pillars of power, and will likely listen more to industry lobbyists in the short term than risk their elite status by supporting radical longer term social fixes.

That’s why it’s always been up to the People to make changes happen. If it gets to the breaking point, we may need a radical painful capital re-alignment New Deal approach.

But in the meanwhile, I believe that with the concentrated efforts of business, government and schools we can “mind the gap” we can sell the American people on a New Deal framework just not all at once, but in bigger baby steps. It may not be too late. Americans are always hopeful given a fair chance to succeed.

We can do this by slowing the pace of dissatisfaction at the water cooler, getting ahead of employee malcontents and listening to their expectations for careers and life as one interconnected thing.

Let’s hire human capital consultants to redesign work flows. Let’s re-create jobs that have meaning, purpose, representation and longevity again.

Wharton professor Adam Grant who studies human capital development found that “employees who know how their work has a meaningful, positive impact on others are not just happier than those who don’t; they are vastly more productive.”

Because it’s not just a job anymore. In America, work is how we perceive ourselves, showcase our self-esteem and progress in life and culture. Something worth preserving. And in this way with new leaders on board we can divert and cool the blame-seeking destructive forces from embracing history as a guide for wholesale revolutionary change.

And if A.I. is the next existential threat looking to become the next revolutionary trigger event, let’s get ahead of it, cut it off at the pass, regulate it, and not let it run away with good jobs willy nilly like Globalization did in the 1990s.

If we want to survive as a free democracy, a Constitutional Republic that re-empowers the People we need to pay attention to the warning signs Turchin and others lay out for us. We need to take back control of our happiness, the American Dream and the definition of work.

We can start by un-electing our Washington elites who won’t listen to the voice for change this election season. We can reign in corporate conglomerate power and influence at the center of unaccountable labor displacements (layoffs). And we can force our educators and corporations to retrain our workforce to use AI as the helpful tool it was designed to be, not the job killer.

We must do this, now!

Because, if we don’t, it’s not the bright future for work or happiness or the American Dream we see coming in 2024, but rather the bleak beginning of America’s End Times.

As published by CEO world Magazine

The invention is as old as humanity. It’s older than religion, older than the pyramids, the great wall of China, older than the first written word. When exactly? Nobody knows. In fact, from the first unrecorded day in history when humans first gathered in markets to trade & sell food, furs, and sea shells on a string, we were ‘in business,’ and we never looked back!  

It’s a fascinating story on American soil too. Mansel Blackford, professor of History at Ohio State pulled it all together well for us in his book A History of Small Business in America. And it makes perfect sense in its simplest expression.

Essentially, from our inception and before in colonial times we hand-made what we needed and bought from small merchant importers all the rest.

A growing westward expansion then grew demand from farmers and ranchers and as small towns popped up across the frontier, so arrived the entrepreneurs to fill the demand. Among the most significant early businesses born of Manifest Destiny was the American Country Store.

These were, for the most part family run 7-11 stores, and anchor tenants joined by barbers, trade-smiths, hoteliers, saloon owners, bankers, and all the rest. And the key common feature most shared among them we often forget. Nearly all were family run operations.

It was this unrelenting expansion that would later become the origin and growth-driver for all entrepreneurial business owners across America. Opportunity was there for the taking. And so did follow the idyllic birth of the American Dream, and America’s Family Business legacy.

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By definition a family-owned business in America is one that has 2 or more family members at work there. Most are small businesses with humble goals, at least in the beginning. Put food on the table.

When I was a kid my forever handyman dad, for example (to earn extra money) had a landscaping company, a tree service company and a 20 x 15sft spot we rented every Sunday at the local outdoor flea market. If they cleared the snow in winter that weekend, we were there. We sold refurbished bicycles, lawnmowers, and anything else we could buy and repair from local junk dealers the week earlier.

It was altogether synonymous with hard work and no pay. Yet if not for the food, clothing, shelter, education, personal care and security my family provided me as a result, I may not have made better of myself and graduated from UCLA with a BA and MBA degrees and here now to help family businesses in America succeed. Mission accomplished dad!

Looking back decades later I’m grateful to have the early experience watching our family of six manage real customers, real schedules, real school, work and play commitments. Time management, team management, resource management and money management; All lessons learned at an early age in ours and any family business. You worked hard and pitched in where you were needed, and together you survived. No questions asked.

Today, as a business Advisor I still use the fundamentals I learned from my dad, but more importantly it helped me understand the people and relate to the pressures of running a family business day-in day-out, and why they do it.

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Did you know that family-owned businesses in America employ 60% of the US workforce, create 78% of all new jobs, and generate 64% of America’s Gross Domestic Product (GDP)? Those are some serious numbers!

And that’s what this is all about. Because the ‘family business’ needs some help and a wake-up call or else our “Country Stores,” America’s economic lifeblood, and the horse-power they provide to local communities across the nation may close for good.

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In their recent 2023 annual family business outlook survey by the global crisis communications firm, The Edelman Trust Institute, they found:

• Only 40% of family business owners say they and their families will be better off in 5-years, a 10-point decline from 2022

And worse, only 36% are more optimistic about their future.

Yikes! So why the staggering loss of confidence?

It turns out, post-Covid economic and social anxieties are the cause. A lack of civility and weakening social relations the Edelman report revealed. These eat away at the heart & soul of America’s family businesses whose trust in the economic and social outlook in America is declining and deflating their long-term confidence.

And yet when asked about why they stay in business, according to the The Family Enterprise USA 2023 Annual Family Business Survey:

79% said their family business is important because it’s part of the “family legacy,” which is coincidently also a part of America’s family legacy, and a beacon to the entrepreneurial spirit of dreamers around the globe.

However, according to research by the U.S. Small Business Administration(SBA)’s non-profit SCORE business advisory team:

• only 30% of family-owned businesses survive from the first to the second generation

And that’s because the odds are not in their favor. 20% of new businesses don’t survive the first year, and 50% don’t survive 5 years.

So. How can we help the family business survive the future?

Make no mistake some of the pain and pessimism is definitely self-inflicted. In my career I’ve discovered that many family businesses suffer from ‘island mentality,’ which is to say not easily accepting outside help. There are many reasons and high emotions behind this thinking, but the results are typically the same. Decline.

Many get their business heads stuck in the ground, and drag their feet when it comes time for technology and management team upgrades. According to The Family Business Center of Loyola in Chicago;

“Many best practices may well be at odds with the fundamental nature of most family

Companies.”

These things are expensive and disruptive, they argue. And family businesses in particular tend to avoid them as unneeded expenditures. That is until something goes wrong.

Is it worth it?

Well. It depends. If you get it right, it’s Boom, Boom, Boom, long term baby!

Love it or hate it… Did you know that Walmart’s annual sales ($573B) totaled 2.25% of our country’s GDP last year? The company employs 1.6 million workers in the USA. That’s a really big family business, or rather was.

Still. It’s hard to imagine Sam Walton started the company as a single location brick & mortar variety goods (country store) retailer back in 1945, with a $20,000 loan from his father-in-law in Arkansas! An astronomical success story, one that underscores the meaning of making your American dream come true, and a bigtime family business success.

The big distinction that pushed Walmart over the hump in the early days was their willingness to embrace newer logistics and inventory technologies or else. Decline. This enabled them to avoid the game-ending pitfalls that many more-stubborn family island businesses fall prey to when trying to scale up.

At the same time, building and owning something profitable that can sustain a generation of family prosperity is the leading driver behind entrepreneurs like Sam Walton who stick it out.

Make no mistake mom & pop shops are still the fledgling future of American commerce and employment. And we won’t succeed without them.

Did you know there are more than 1 million husband & wife businesses right now across America according to the SBA.

But if they want to grow big and prosper in the longer term according to the 2023 SBA/SCORE Family Business survey and other experts, family businesses need to help themselves as early as possible in their lifecycle, before it’s too late.

Here are a few important practices most family business owners could do now to improve their chances of success, for example:

• Open the back office – Embrace new technologies top to bottom. Just because something “works” doesn’t mean it’s the most efficient or profitable way

• Hire a CFO or VP of Finance asap – This is often overlooked. As an M&A advisor we see higher valuations and better financing terms for small companies with sound financial practices

• Develop better governance – Create an advisory board that includes outside directors with no skin in the game who are well qualified to provide advice for the challenges of a growing business

• Focus on the next generation – Ensure that family members committed to the company’s future serve on boards and committees to nurture and grow their business expertise and management skills

• Act small, think big – Be more customer and employee-focused. 74% of family-owned firms report stronger values and culture than non-family-owned businesses. So, use that to emphasize your commitment to each customer and each employee, each day. This will strengthen the community bond between employees, customers and family

Giving hope and a helping hand

Lastly, it’s not all bad news if you know where to look. Despite the headwinds, according to the Economic Innovation Group (EIG), a non-profit public policy research firm, there’s been “a huge surge in the number of new business applications” in the past two years, much greater than pre-pandemic levels.

And to help smooth the way for these fledgling family entrepreneurs, and all small businesses, members of Congress decided to step up as well.

Last December 2022, a bipartisan Congressional Family Business Caucus was formed to connect Members of Congress with family businesses in their district/home states to promote an open productive dialog and develop solutions to assist local businesses. [Click on the link to find your representative.]

Their goal, along with the SBA and SCORE, is to help support and promote the important role of family businesses by reducing government red-tape and put a spotlight on “workforce issues, tax policy, economic issues, and community development,” they say.

It remains to be seen how effective government can be these days. But as a family business advisor I welcome any help if it works!

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But in my view in order to slow the growing pessimism and decline of America’s family businesses it will take a village, so to speak. And that village is your home town USA. Because the real help must start by readjusting our purchasing behavior.

We control the destiny of small family businesses in America, not our government nor any other. But no family business can survive nor learn to engage any “Best Practices” if we don’t provide the most important part first: paying customers.

So, let’s give it some thought this holiday season. Think about the impact you’ve read about here, and the responsibility we each have to preserve and strengthen our family businesses. They are vital threads that founded the fabric of our proud American culture and legacy.

Try to shop locally in person and on-line this holiday season. It can make or break the future for our children and our future Country Stores. Because we’re all in this together, right?

And remember, when you shop locally chances are the smiling face looking back at you from behind the counter is a welcoming family business owner whose entrepreneurial spirit still has mouths to feed, just like you!

Happy Holidays to all.

———–
For a deeper dive into Family Business structure and leadership best practices, the University of Loyola Family Business Center published these information/education guideline white papers that can help you navigate around pending pitfalls. Print them, read them, learn from them, like I did:

• Managing Relationships (PDF)
• Guidelines for Family Business Boards of Directors (PDF)
• Leadership (PDF)
• Strategy / Finance (PDF)

For more insights and assistance with your family business check out these resources I used:

1. Family Enterprise USA
2. Elderman Trust Institute Barometer Survey
3. Congressional Family Business Caucus
4. SBA/SCORE 2023 Family Business Survey
5. The Family Business Center of Loyola

———-

Fun facts from Family Enterprise USA

• 91% of family businesses kept jobs during the recent high-inflation period
• 46% pay “above average” wages and benefits
• 72% have non-family “generational employees” working there
• 82% of survey respondent companies donated funds to local charities

Rick Andrade

Rick Andrade – at CEO World Magazine

_________

So. Who owns the definition of Success: Webster, Wikipedia, Wall Street, your raving fans, or you?

Success 2023: (noun)

1. The achievement of something desired, planned, or attempted.
2. The gaining of fame or prosperity. 

Look it up! Nearly every online dictionary prints the same definition. Success is synonymous with achieving something: power, fame, fortune, all of it. But nothing about how you’re supposed to feel about it. So, what’s happened? Where has that simple happy feeling of Success gone today?

Did you know the word Success was first printed in the 1530s according to etymology research. And the definition then unlike now included something more, ‘a happy outcome.’

The earliest definition I can find comes from Samuel Johnson’s “A Dictionary of the English Language,” published in 1755, which defined “Success” as:

Success (1755): (noun) [succès, Fr. successus, Latin] “The termination of any affair happy or unhappy.”

That’s odd. We think of Success today as a point of achievement that only makes you “Happy.” And only unsuccessful people are unhappy. But what was perhaps an early warning from our thoughtful ancestors appears today to have fallen away.

Part of the reason is our culturally persistent pedestal praise of over-achievers and our preponderance to over-label them as the definition of Success in America. We then further burden them and ourselves with an ancient Roman-era Gladiator games addiction to perennial blood lust in the arena. And for those who waver, death. Welcome to the modern definition of Success.

In fact, the origins of successful people may surprise you.

The best book to read about how a seemingly unlikely person becomes a big Success isn’t from a Harvard Ph.D. or an experienced CEO, or entrepreneur. It’s Malcolm Gladwell’s 2008 Outliers: The Story of Success, in my opinion.

Gladwell is a Canadian and staff writer for the New Yorker and penned 7 books on social and psychology issues. He likes to go deep. And as an outsider looking in his research suggests that Success is less about ambition, luck, and connections, you still need those. But the very best of us most unknowingly have subscribed to the “10,000 hours rule,” which says it takes 10,000 hours practice (4 hrs/day, 5 days/week for 10 years) focused on a single task to elevate your notable abilities and profile into the top 5% echelon of your field. Drop the mike.

From sports stars and Hollywood celebrities to Wall Street titans, Gladwell articulates how your fame and/or fortune was most likely a practiced and predictable outcome at an early age. That said, my gripe with the game of Success is not the effort, but why too little time is spent on teaching and learning how to be happy once you get there.

Ask a watercooler colleague. How will Success make you feel? Most will say: Great! Why?

I find it odd that “the feeling” of Success isn’t a part of the newest definition of the word. Why is that? It should be. I see many CEOs and business leaders that are by definition so to speak very successful, but they don’t feel that way. Why is that?

Maybe feeling like a Success means you have to be a Winner?

When I was 17, a high school senior and baseball player I hit a game-winning grand slam home run at Hillhouse High back in the day. And it felt magical. The ball flew off the end of my bat like a crackling bolt of lightning, up and out over the fence, a blast of rare beauty.  Everyone watching that ball arc out of sight felt it too, jumping to their feet, screaming and cheering. And after I rounded the bases and landed both feet on home plate it was official, team mates gushing from the dugout piling onto me, I was the Babe. A real winner. A dream come true stand-out Success. And I made the news.

But then, as is the nature of humanity, when the after-party ended, the fan-fair died down, and the glory in the arena faded, it was over. Just like that. To reach that level again I would need another grand slam homer, and another, and another. But it never happened. The Babe had seen his last big blast. I felt empty. The feeling of Success had become nothing more than an obsession to repeat that victory win, and it pulled me away from other more important things. It would take years to learn the difference between being a winner and feeling a Success.

Still. If Success is all about winning then it doesn’t take much looking in America to find it. It’s everywhere all in your face famous home run hitters, movie stars, billionaire moguls and award-winning over-achievers. We elevate them because we identify with them, and their rags to riches 10,000 hour backstories.

Success in America comes from the external praise from others, and the cash. Lots of cash. Combined it forms a veneer of invincibility fed by an alchemy of self-achievement. And the greater the ‘fix,’ the greater the need to achieve more and more.

Therein lies the downside.

In America it seems nearly all wealthy successful people are happy, at least on the outside, right? Misery comes with the territory they say. Just never let them see you cry. That’s borne on the inside, and nothing that can’t be disguised from sight.

For younger executives the downside of Success is the growing sacrifice paid in time away from family, and the silent damage toll that accumulates with the voluntary surrender to the addiction.

For many it’s the job, the unwitting result of 10,000 hours of competitive drive and effort over time to reach the very top. And it’s here, high in the clouds where they discover the bitter dark side of Success in America.

Dr. Steven Bergas, author of The Success Syndrome: Hitting Bottom When You Reach The Top, gets to the point. He defines the dark side of Success as the Success Syndrome, when feelings of great Success are followed by feelings of depression and despair from the constant need to perform and to live up to one’s own past achievements, like a Gladiator, a consecutive grand slam home run hitter, or business leader. These are feelings not seen from the outside.

To the outside world you’re a big star, a key essential prime example of the great American Dream come true. But unfortunately, many top dogs tend to overlook what it takes to be a real Success in everyday life on the inside. Business executives, says Dr. Bergas are particularly vulnerable to the downside aspects of the Success Syndrome.

I know successful business leaders who’ve had more than two ex-wives, more than two kids, more than two homes and more than two headaches all at the same time. They didn’t plan it that way. But, Success for them is a quiet vacation alone on deserted island. What’s up with that?

At work, these super achievers can mow down any obstacle in their way to Succeed, manage high-performing teams and excel at balancing the most challenging issues. Their passion and drive are all together pure rocket fuel. But in their personal lives, on the home front, being a Success is a complete disaster.

Dr. Bergas argues that Success at work can lead to deeply damaging consequences in your personal life, or worse ruin your health. And nobody talks about it. Mostly because in our society being a Success on the outside is all that really matters. Afterall, cash is still king, right?

Maybe there’s a better way.

I think it’s time we once more rewrite the definition of Success, if not for ourselves, then for our kids. Away from the deep chasm’s edge of material gains and re-define the meaning back to where it began. In my view the correct definition of Success should read:

Success: says Rick Andrade is: 

A sustainable feeling of well-being (happiness) balanced in personal achievement and satisfaction at work, and at home.

Simple right? Sure. But apparently not as easy as it sounds. Experts like Bergas say if you can’t balance the work/life equation, the same equation most contemporary employers pledge to offer new-hires every day, you need to take a step back and seriously check in on your approach, identify root causes and right the imbalance. Begin with a look in the mirror. Because it’s about you, not the job.

Those that can admire their own reflection in the absence of wealth or rewards or work are the truly happy successful people in life in my view.

So. How can we join them?

Richard Branson says “Success is happiness.” Mark Cuban says “it’s waking up every morning with a smile on your face.” Warren Buffet says it’s all about “how many people in your life you want to love you, actually do love you.” I love that one.

At my alma mater UCLA, famous basketball coach John Wooden whom many consider the most successful college basketball coach of all time gave the idea considerably more thought.

Success: says John Wooden is:

“Peace of mind attained only through self-satisfaction in knowing you made the effort to do the best of which you’re capable. Creating and preserving your reputation and character.”

Wow. So, why isn’t that in the dictionary’s definition of Success?

In other words, we’re being misguided. What if the real secret to Success is not wealth, achievement, or fame. If you’re satisfied in life, friends, family, job then you should consider yourself at the top of your game. The real definition of Success for you is therefore a personal choice to align your goals and measures to seek and find happiness, not money.

Earl Nightingale best-selling author, radio personality, motivational speaker from the 1950s till his death in 1989 spent his life searching for the ‘Secret of Success.’ He says Success is “the progressive realization of a worthy ideal.” Not the fastest car, biggest house, best school, country club membership, or bank account.

Real Success is a personal journey of self-realization. And the real secret to Success is finding happiness along the way. Like Buffet said, it’s how many people you want to love you, actually “do.” And the easiest way to chart your course unsurprisingly comes from the great Stephen Covey, author of The 7 Habits of Highly Effective People, who says “start with the end in mind.”

Write your own epitaph. Creepy, yes, but when it’s on paper and posted, you’ll have your map.

In the meantime, becoming a top 5% pro can include all the wealth and fame you can get your greedy hands on. Nothing wrong with that. But not at the expense of what will make you feel happy. Branson’s right, Success is happiness. And true Success in America is perfecting the balance of life that gets you there.

So, if you’re ready for a change join me and start spending your next 10,000 hours at it. I think you’ll find like I did that if you “do it“ because you want to, not because you have to then the real secret to Success is the self-realization you know the road you’re on makes you feel happy. And those who love you are truly happy that you’re there to share it with them, every day.

Sound about right? 

A few books I recommend that can help blend Success with happiness on your journey to achieve them both:

1. “Think and Grow Rich” by Napoleon Hill. This timeless classic outlines the principles of Success, including the power of positive thinking, goal setting, and persistence.
2. “The 7 Habits of Highly Effective People” by Stephen R. Covey Covey presents a holistic approach to Success through seven habits that focus on personal development, effective communication, and achieving long-term goals.
3. “Mindset: The New Psychology of Success” by Carol S. Dweck Dweck explores the concept of fixed vs. growth mindsets and how your mindset can significantly impact your Success in various areas of life.
4. “Grit: The Power of Passion and Perseverance” by Angela Duckworth Duckworth discusses the importance of grit – a combination of passion and perseverance – in achieving long-term Success.
5. “Outliers: The Story of Success” by Malcolm Gladwell Gladwell delves into the factors that contribute to high levels of Success, challenging traditional notions of talent and luck.
6. “Atomic Habits: An Easy & Proven Way to Build Good Habits & Break Bad Ones” by James Clear focuses on the role of small habits in achieving Success and provides practical strategies for making positive changes.
7. “Drive: The Surprising Truth About What Motivates Us” by Daniel H. Pink Pink examines the science of motivation, shedding light on how autonomy, mastery, and purpose drive Success.
8. “The Power of Now: A Guide to Spiritual Enlightenment” by Eckhart Tolle While not solely focused on conventional Success, this book emphasizes the importance of living in the present moment and cultivating inner peace.
9. “Lead the Field” (audiobook) by Earl Nightingale who argues Success is a matter of sticking to a set of commonsense principles anyone can master. The magic word is ‘Attitude.’

——————————–

Written by Rick Andrade.

Published by CEOWorld Magazine

In America, July 4th is Independence Day. A time for celebratory fireworks and backyard BBQs with friends and family. It should also be a time for our collective reflection on our lives, the value of truly being a free nation, and on the blood sweat and tears of the honorable men and woman who gave their lives selflessly to make it all happen. But as time passes, we forget why celebrating our independence and freedoms from monarchial oppression 250 years ago is so critical to preserve today. We essentially take it for granted that things will forever stay the course here at home. But whose course is that?

I think we should become more patriotic. It’s just a feeling. But in that same two centuries’ time other nations and their citizens have not yet experienced the same good fortune embracing the founding principles of our western democracy. And yet every passing July it gets more fragile. 

As history teaches us no matter how free we are in between BBQs and ballgames we still have to put food on the table, and earn a living. That means making money. Probably the single best talent most Americans are good at. And when you motivate a crowd well, amazing what can happen.  

In 1956 the US Congress changed the words E Pluribus Unum which in Latin means “out of many, one,” to “In God We Trust” on the face of our US currency. President Eisenhower thought it was a good idea, a simple yet spirited motto all Americans could relate to as America kicked off the “Golden Age of American Capitalism.” How’s that for motivation. 

In the 15 years from 1945 to 1960, US gross national product grew from $200 billion to more than $500 billion. That growth came from infrastructure spending on highways, roads, bridges, tunnels, railways, telephone lines, new homes, autos and all the toys you can fit into your new 2-car garage. All of it made for a grand affair between Americans and their beloved country in the postwar era coast to coast. 

But then a hidden price to pay. 

Today the US GDP is 60 times larger than in 1960 topping a whopping $30 Trillion dollars! But in that time, we also grew to sacrifice our core principles of democracy and freedoms as international commerce became essential to our insatiable lifestyles. That’s when America in the process rebranded our currency from “In God We Trust” to “In Trade We Trust.” 

In 2022 America traded $7 trillion globally. Our largest trade partners for decades were Canada and Mexico. But today the US’ largest international trade partner is most notoriously The PRC (Peoples Republic of China). On the backs of millions of rural minions flocking to the cities there for better work, a better life was all the motivation they needed. And then up went the Open for Business signs to the west.

China is now Americas #1 trade partner. America imports ($530B) far more than it exports ($150B) to China. And that’s not fair. China restricts American businesses from selling in there unless you’re dug in deep with the system, and with the “Party.” 

It would have surprised Americans back in the 1950s that China would have become America’s #1 trade partner today. It would have also shocked them to see all we sacrificed for it. Once a great manufacturing country American business capital decided to look around. And when China stepped up, like a crack addict we grabbed the pipe.

Large western profit-hungry companies dove head-first into the pool spending billions to build and support hundreds of factories in China. All you needed besides mountains of cash was a narrow focus, always looking down and away from any un-business-like matters not of your concern there. 

In exchange American capitalism was the winner. We got access to China’s vast domestic markets. And given new markets, low costs of goods, cheap labor, and solid profit margins it was heaven on earth. 

And this apple was sweet. It put everything we could desire within reach of our pocketbooks. It doesn’t matter that China is a communist dictatorship, where liberty and justice human rights are nebulous interpretations. We’re hooked. Asleep at the switch. And it’s taking us down. Fast.

They say China’s oldest and longest river, the mighty Yangtze has changed course 18 times in its 4000-year history, devastating vast swaths of land in its wake. And translated into economic terms it’s at it again.  

When the PRC elected Xi Jinping the country’s new president in 2013 few had in mind anything as radical. But they were wrong. Now elected for an unprecedented 3rd 5-yr term in 2022 Xi Jinping like President Putin changed the rules allowing himself to be a de facto president for life. And if history is any guide what was a hopeful bridge to western democratic thinking through trade, suddenly collapsed under the historic weight of a new dictatorial autocracy. 

The new course is pure ideological. That means cracking down hard on political and cultural deviants like those in Hong Kong, and exercising more controls over civil and business conditions throughout the country with a real sense of urgency this time, or perhaps panic.

In his opening speech to the PRC Congress, Xi laid out the river’s new path. And it wasn’t to expand the Apple Foxconn plant, or a new Tesla facility or Nike shoe factory. 

It was the “reunification” with Taiwan. 

One word, and there it was on paper. The Yangtze was changing course. 

China has been infected by America, a moral-less consumption crazed country past its prime, on its way out. And he’s right. We are weaker than our fathers, and now the time has come for China to assert its intentions as the world’s 2nd largest economy by standing up to #1, and to our US military dominance in the Pacific by taking back the island nation, a murky 80 miles off its eastern coast. 

Make no mistake China understands the ramifications of an invasion or blockade of Taiwan. American diplomats have made the consequences abundantly clear, if anybody is listening. We are defending a cradle of democracy, a democratically free people, 24 million strong, and home to the world’s largest semiconductor chip house, Taiwan Semiconductor Manufacturing Company.

So now, not only has America “given away the store,” we also now have a choice — we either look the other way and allow business as usual or “just say no” step back and defend the seeds of liberty, the same ones we take for granted.

So, who’s to blame for this mess?

It’s no surprise that China has been good for business. For decades US-based businesses have benefited from manufacturing and selling directly to China’s 1.4 billion citizens. It pays profits to pander to the market-entry overlords for access, and that’s exactly what’s been happening.

Among the largest US companies in China are household names like Apple, Ford, Tesla, GM, Qualcomm, McDonald’s, KFC, Starbucks, Coca-Cola, Walmart, Procter & Gamble, GE, IBM and on and on. Each earns and burns billions in China. 

But if things get worse between our two countries, what then? 

As China reclaims its insular past dominion Xi Jinping could easily turn dozens of America’s industry-leading companies into chopped suey, starting with some of America’s biggest semiconductors, as you can see in the table.

• 

The message is clear. China has its own Manifest Destiny now, it’s to become completely self-sufficient on the mainland, and reunify with Taiwan offshore, the West be damned.

But while Xi’s stated goal and rally cry makes perfect sense at home. Does he understand the ramifications? 

Any attempt by Xi to egregiously disrupt Taiwan will almost certainly trigger Russia-like sanctions and deeply disrupt global commerce. It would be like hitting an economic global thermal nuclear bomb button. 

But maybe it’s time for a sickly America to feel a hard slap to snap out of it, get back to our healthy roots and home cooking again.  

Why help ourselves to a precipitous demise at the mercy of a nation bent on seeing America financially and culturally crash and burn, along with our righteous freedoms and democracy our forefathers died to protect? Maybe it’s time to look in the mirror and recognize wherein lies the problem. 

Needless to say, China is doing what China does best, and the Chinese government under Xi Jinping is not here to help remind America why we celebrate the 4th of July. That’s our job.

I think it’s time to call out all Americans to wake up and stop manufacturing goods in China, and stop buying cheap products made in China, at least until we can right our ship. Our addiction to rock bottom prices and profuse gluttony for things we don’t need at the expense of our existential values in senseless self-destruction. Every dollar sent offshore is missing from the scales of our weighty problems here at home. 

Take a look around. Are you happy with business as usual in America? Should profits and economics be the greater force behind “In God We Trust?”

Listen. I get it. Making money is a fundamental part of our capitalist system, it’s part of our DNA, but nowhere does it say we need to compromise the higher moral ground for cheap toys, Tvs or tennis shoes. 

I say it’s time that we put “In God We Trust” back into the equation this 4th of July. Take this opportunity to wean ourselves off the online quick fix over-spending binge culture we created, and grab back from the brink our founding principles that birthed this awesome country, the beacon of freedom and human rights. What say you?

Like rain, when it falls, everything gets wet. And when it rains a lot, the ground around you can sink you deep into the mud. Such is the case; each passing day that confirms it, it’s raining Artificial Intelligence (AI). And the real downpour is about to drop golf ball-sized hail on us. 

Here’s the promise from the newest version of AI called Large Language Models (LLM). Several tech companies are racing to deploy their own LLM versions because given the recent release of OpenAI’s ChatGPT 4.0 the rate of potential job disruption is exploding with the promise to forever increase the productivity of every human function. And nobody wants to miss that.

In turn, AI preachers say it’s a renaissance that will open the gates of ethereal human pleasure, allow us to work 10x faster and cheaper forevermore. That sounds perfect, doesn’t it? The only downside is there may not be anyone left around to care about it. But this isn’t a sci-fi film.

Generative Artificial Intelligence as it’s called is still just a toddler, but a popular one as evidenced by the record setting 100 million new users who downloaded OpenAI’s ChatGPT AI software since its first widespread launch last November ‘22. And there’s been nothing like it since Tiktok captured the attention of millions when it went viral back in 2016. But this feels different. And I’m not alone.

Make no mistake, the Fourth Industrial Revolution is upon us according to the World Economic Forum.org. And like the last three there is a coming wet that will likely require millions of workers to reskill using AI or be left behind in it. 

In a recent Goldman Sachs analyst study: The Potentially Large Effects of A.I. upwards of two-thirds of all jobs, 100 million U.S. jobs are exposed and at risk to AI they say, and this time it’s not just the older workers’ heads on the block. Jobs from attorneys to interns and a long list of others are all on muddy wet ground. 

In my last article Ever Heard of ChatGPT for Executives? we discussed the release of ChatGPT 3.5 AI and listed the competitive players fighting for AI dominance, along with the potential impact of AI to displace workers. I also tested it, and it passed as a professional services consultant rendering me useless in less than 4 seconds. Just kidding, it was less than 3 seconds. 

Worse for me still in the last two months OpenAI went and did it again by releasing a newer and more improved version, ChatGPT 4.0, with direct access to the internet, making it even more accurate and impressive passing even more professional exams and increasing its output accuracy.

In business when wisdom calls for a pause to wait and gather more information, it’s generally called a “fast follower.” That strategy suggests not to rush into anything. Let the kids go first. Because in business jumping on the latest roller coaster ride at the business park makes no sense when the gut-wrenching twirls end with you back to where you started, and with messed up hair!

But this time the wisdom of waiting is the wrong call because experts say the AI roller coaster has not only left the station, but it’s also never coming back, more like a SpaceX rocket to Mars with you and your business strapped to the outside.

Still. Of those I asked, most are playing the waiting game, keeping one eye on ChatGPT developments the other on everything else. Keep in mind unless somebody stops it, AI is rapidly altering the employment landscape, sending shock waves across many white collar professional and creative jobs unexpectedly in the line of fire.

For business owners and middle market CEOs it’s not a matter of taking a back seat and surviving through yet another major transformational roller coaster ride in business and human evolution, it’s potentially an existential war, and those slow to make plans for it are needlessly amplifying their risk exposure to it. 

Remember the dotcom wars in the late 1990s? These were the early days of the internet when many brick-and-mortar companies suddenly found themselves caught off guard. They simply waited too long to react to this game-changing new tech. And by the time the bell rang it cost millions more in catch-up money to make up for lost time.

And here we are again.

In a recent podcast Max Tegmark, physicist and AI researcher at MIT and author of Life 3.0: Being Human in the Age of Artificial Intelligence says it may already be too late for many businesses and “if you’re in a situation where your company is going to get screwed by other companies

[using advanced AI]

you’re putting people in a very hard situation.” Meaning like the early days of the internet, you can’t sit on your hands and wait this one out.

“Right now, we’re at a fork in the road, this is the most important fork humanity has reached in the last 100,000 years,” says Tegmark, and we better get it right, or it’s a suicide race he says. This is part of the recent argument for the sake of humanity to halt AI releases for 6 months. Several innovators like Elon Musk have signed an open letter to halt all AI development until government and regulators can catch up.   

Part of this reasoning comes from Google who thinks two-thirds of all jobs will be impacted by AI models in the coming years. Sundar Pichai CEO Google says “this is going to impact every product across every company” as super-powered AI assistants work alongside us to enhance our productivity.  

Still. There are growing pains. They’re called “hallucinations,” whereby LLM models can output results that are flatly wrong. In a recent experiment conducted by CBS news 60-Minutes they asked Google’s Chatbot, called BARD a competitor LLM to OpenAI ChatGPT, about inflation. BARD wrote a comprehensive economics essay in seconds, and even recommended 5 books to read. But on closer inspection the books didn’t exist! BARD simply fabricated the titles. And no one knows why. That’s a serious problem to say the least Google admits. 

But these are early days says Pichai, and improvements underway will correct these flaws. Still the most at-risk jobs are “knowledge workers” he says like doctors, lawyers, accountants, teachers, writers, content creators, and software designers. Basically, all of us who will soon be “assisted” by AI technology. 

Should the government help?

Without controls bad actors can manipulate AI and wreak havoc. Or worse. If a runaway AI itself decides humans are a wasteful useless menace and must be destroyed, then what? Until now these dreadful possibilities were only seen on the big screen. It seems that has changed. As mentioned, there are loud warnings being voiced by industry pros. Center for Humane Technology founder Tristan Harris says “this is a different class of technology. It’s the speed of deployment that’s the problem. Because “no one is building the guardrails, and we’re putting it out there before we know it’s safe.” 

It’s not. But while Congress plays catch-up, suggested remedies are popping up. They include a Universal AI Constitution, or creating a self-regulating industry watchdog with guidelines for developers to adhere to, not unlike the 2019 call for a global moratorium on CRISPR DNA gene editing and human cloning. 

But this isn’t gene splicing in a pharma lab. AI is now at the fingertips of every human on Earth, bad actors big and small included. And with the cat out of the bag many like Elon Musk fear the technology may already be unstoppable at this point. Although Mr. Musk does often exaggerate our human frailties. 

So then. What should a CEO and business leader do right now?

Pretend LLM AI tech is another internet-type of evolution and get it right this time, stay ahead of it. Follow the links in this article and learn all you can. And of course, Make a plan.

My advice is to immediately set up an AI Evaluation Task Force with a team leader in each functional area of your business to study and benchmark where you are on the AI exposure spectrum. Reference the Goldman Sachs analyst study for more line-item details.

I suggest a S.W.O.T. analysis (strengths, weaknesses, opportunities, and threats both internal and external) as the baseline framework for studying the impact of AI on the business. Then go deeper, job by job. 

No surprise. The GS AI report projects a significant impact across nearly every job function in nearly every department including:

• Accounting & Finance
• Administration
• Advertising & Marketing
• Customer service 
• Engineering
• Human Resources 
• IT Systems & Security 
• Legal
• Research & Development
• Sales & New Business Development

Nothing like this has happened since the PC was invented. This is why you need a focused effort to go deep, examine and report back. Once you have a better idea of what you’re up against you can adopt, adapt, or ignore. It’s your choice. 

In the meanwhile, take a closer look at your industry and competitors’ adoption rates of different AI applications. See how you compare. It should be early days, giving you a chance to dodge the heavy rain, and see what new skills and opportunities are coming down at you.

In any event, it’s not the time for the wary wisdom of wait and see. This is the time for real action in real time, before you need expensive consultants to fix things again. And if you need help getting started, do what I did, ask ChatGPT 4.0 for assistance. The answers might just ring that bell for you.

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Written by Rick Andrade.

As published byCEO World Magazine.

At first, it seemed as if it came out of nowhere, like an asteroid hitting the center of the cyber-ocean. You know you’re going to feel it. And after reading this review of my experiment, you’ll also feel why this time, the rippling effects of this tech tsunami leave nowhere to hide. 

It’s called ChatGPT-3.5. It’s the latest natural language Generative Artificial Intelligence texting chatbot, a type of AI that creates new content from learned patterns of prior content and training. It’s a new branch of AI, unlike traditional AI, which looks for patterns and trends in data pools to make all-important predictions. Generative AI tries to interpret the question as deeply or broadly as you ask it to and respond in a natural written context.  

This human-like generative AI platform was created by San Francisco start-up OpenAI, which recently received a $10 billion investment from Microsoft whose own AI experiment Turing-NLG was falling behind. That’s a big tip-of-the-brim even for tech these days. So. Is something big on the boil? 

The technology is not new. Several other tech companies have cooked up similar versions of machine learning AI platforms in the last few years including some heavy hitters you may know:

• Google’s BARD
• Facebook’s RoBERTa
• Amazon’s SageMaker GPT-3
• IBM’s Watson Natural Language Processing
• Wolfram’s Mathematica
• Microsoft’s Turing-NLG

But none got much traction. Perhaps the most notable was a big tv game show star. Do you remember IBM Watson as the middle player on Jeopardy back in 2011? That was early AI doing its thing and we loved it, watching heralded Jeopardy champs get their minds clobbered by a creepy over-calculating black box with swirling blue lights perched in-between redundant humans. Lol. Still. I admit creepy or not it was utterly mind-blowing to watch. 

And then there was a new leader. In 2017 Google’s DeepMind Alpha-Go beat the world’s best GO player, followed in 2018 by Alpha-Fold which correctly predicted complex DNA protein fold structures. From there the sky was the limit, and there was no stopping it.

But then like a glorious sunset it all faded. At least from the headlines. Mostly because the use-case was too narrow and it was expensive to engage and access terabytes of data at any instant. That meant access was largely only affordable to super-sized institutions with large piles of data, and deep pockets to mine. Nonetheless, Watson and the others needed a way to monetize the billions invested in AI and they found it. But meanwhile in the cradle the foundational birth of generative artificial intelligence was looking for a breakthrough. 

It would take another 4 years before that would happen in late 2022, and to say it’s a breakthrough means it still costs more to operate ChatGPT which has yet to turn a profit. 

So why is this big news? 

Originally this article was outlined to sample CEOs in 2023 and discuss their reactions to the Fed’s recent interest rate moves to clamp down on inflation. But then ChatGPT went viral and dropped the mike on my toe. 

Suddenly there was a new free-access natural large language model text bot on the scene released by OpenAI with enough data stored to make its responses incredibly useful across nearly any subject, and that exploded the internet. It captured global attention instantly and in less than 60 days miraculously accumulated more than 100 million users, a record-smashing achievement 4x faster than the reigning champ, Tiktok! 

Flash Headlines! Students cheating on college essays written by ChatGPT. 

It’s been all over the news, headline after headline. I’m sure you’ve heard about it.

In less than 2 months ChatGPT has passed the legal Bar exam, medical licensing exam, MBA finance exam (ouch!), a physics exam, written books, essays, songs, poetry, and complex computer code for programmers, cutting a day’s work down to mere minutes. In that time since however, it’s also making some people nervous about their jobs. Teachers, writers, content creators, coders, scientists, professors, poets, artists, you name it, and even YouTube influencers are suddenly uncomfortably stunned by their flickering screens, like humans in highlights. Something has come for us.

For the first time in a long time some new mind-blowing technology has yet again come for our jobs. This time more than the AI automated robots that now make the AI automated self-driving cars we buy from the AI automated websites we search. Heaven, right?

The good news is ChatGPT is at this point “knowledge over movement.” It’s trained on unprecedented amounts of historical data and that’s what makes ‘most’ of its answers so comprehensively accurate. It pulls from millions of lines of texts in books, articles, research papers, forums, social media blogs, websites, Wikipedia, and millions more content sources and makes it all together accessible. It then tries to create entirely new content pulling from this giant horde all at once. And the results can be jaw-dropping, and for me a bit dehumanizing too.

Rather than using AI on a narrow institutional data set to find efficiency patterns and make predictions like Watson-Health AI for example, ChatGPT is simply trying to predict the next word in an answer sequence from any related source within its data realm (thru 2021). Imagine a subject-tasked research assistant enters a library and minutes later returns with a comprehensive report for you. Amazing right? Now, replace that human with an AI bot and teach it to learn from each trip to its own vast digital library and Boom! The newest HAL 9000 (2001 A Space Odyssey) computer is born. And we know how that ended. 

But let’s stay curious. How does it produce professionally smooth and comprehensive answers?

It’s all in the question you ask, according to Search Engine Journal expert Roger Montti in What is ChatGPT And How Can You Use It?

“What sets ChatGPT apart from a simple chatbot, says Montti is that it was specifically trained to understand the human intent in a question…” 

In other words, the more descriptive the question, the more detailed the answer? That makes sense.

So – What’s next – Is ChatGPT friend or foe?

The potential impact of such a human enhancing productivity tool is not easy to digest when your job is abruptly on the line. Does anybody mourn the tragic loss of fired mimeograph manufacturing minions when Xerox introduced the world’s first paper copy machine back in 1959? No.

Or how about parking-meter coin-collectors when digital parking meters sent them packing under a freeway overpass? According to a 2017 comprehensive McKinsey research study ‘by 2030, around 39 million Americans could lose their jobs due to the shift toward automation.’

So here we are again. The next industrial revolution productivity wave has arrived. And with it yet again a cyber Trojan Horse. And for many who can live with it as a simple productivity tool rather than a job eating cyborg, I suppose ChatGPT is likely to be well embraced. But. If not, this new know-it-all HAL 9000 copycat may have to go.

You knew this was coming. Just relax. I want to help you.

According to Business Insider Magazine the first signs of job disruption will indeed come in the form of an innocent helpful productivity tool. You be the judge. They suggest we not be afraid. ChatGPT is only here to help.

• Use ChatGPT in Search as a Google alternative
• Use it to write essays, speeches, cover letters, songs, scripts, even employee evaluations
• Use it to analyze vast amounts of data
• Use it for scheduling tasks, planning, and time management
• Ask it how to start a business, make strategic decisions, and support customers
• Turn it into a computer coding assistant
• Use it to apply for a new job or to negotiate a raise

Sounds a lot more than just a productivity tool to me. I love the last one on the list. This one made me smile. In other words, even if ChatGPT terminates your job… it can help you find a new one? Does that include me? Surely not my job as a top-rung professional business advisor, I wouldn’t think, right? 

Hmmm. What if I ask my new know-it-all friend that question: 

Which industries are most likely impacted by ChatGPT? Here reprinted is the answer:

[ChatGPT: The industries that are most impacted by the use of language models such as myself are:

1. Customer Service and Support
2. Marketing and Advertising
3. E-commerce
4. Healthcare
5. Finance and Banking
6. Education
7. Transportation and Logistics
8. Human Resources]

Ok. That’s a lot. Can you give me some examples?

[ChatGPT: Here are some examples for each of the impacted industries:

1. Customer Service and Support: Chatbots powered by language models can be used to automate customer service inquiries, reducing response times and improving customer satisfaction.
2. Marketing and Advertising: Language models can be used to generate creative and personalized advertisements, product descriptions, and social media posts.
3. E-commerce: Language models can be used to provide product recommendations and answer customer questions about product specifications, availability, and shipping information.
4. Healthcare: Language models can be used to assist with medical diagnosis, treatment planning, and patient education.
5. Finance and Banking: Language models can be used to automate financial reports, analyze market trends, and provide personalized investment advice.
6. Education: Language models can be used to generate personalized study plans, answer student questions, and provide instructional material.
7. Transportation and Logistics: Language models can be used to optimize delivery routes, track packages, and provide real-time traffic updates.
8. Human Resources: Language models can be used to automate the recruitment process, assist with onboarding, and provide support for employee benefits and payroll inquiries.

Please note that these are just a few examples and the applications of language models can vary greatly depending on the specific use case.]

That’s a good answer, I quipped back but with a confident unwritten huff. Then it hit me as I re-scanned the list, I realized the damage is going to be to a wide swath of people across a wide spectrum of jobs, and ChatGPT couldn’t care less about mine.

So I got right down to it and asked: If I’m a CEO, what should I pay most attention to here? 

[ChatGPT: There are several reasons why OpenAI technology is important to CEOs:

Here are some examples:

1. Increased Efficiency and Productivity: For example, a manufacturing company can use AI-powered robots to automate the assembly line, increasing the speed and efficiency of production.
2. Improved Decision Making: For example, a retail company can use AI to analyze sales data and customer behavior, identifying trends and patterns that can inform decisions about product pricing and inventory management.
3. Competitive Advantage: For example, a transportation company that uses AI-powered logistics optimization can reduce delivery times and costs, providing a competitive edge over rivals.
4. Cost savings: For example, an energy company can use AI to optimize energy usage in buildings, resulting in significant cost savings.
5. Personalization: For example, an e-commerce company can use AI to recommend products to customers based on their browsing and purchase history, leading to increased sales and customer satisfaction.
6. Predictive Maintenance: For example, an airline company can use AI-powered predictive maintenance to predict when an aircraft component is likely to fail, enabling the company to schedule maintenance at the most cost-effective time and minimize downtime.
7. Identify new opportunities: For example, a financial services company can use AI to analyze market data and identify new investment opportunities.
8. Predictive modeling: For example, a healthcare company can use AI to create predictive models to forecast future patient needs and allocate resources accordingly.
9. Cybersecurity: For example, a company can use AI to monitor their network for suspicious activity and respond to potential cyber threats in real time

Wow! It’s not Shakespeare, but I do fear thy able apprentice scribes henceforth be put afield… aka in basic English it’s clearly only researchers looking for a new job – Surely us few top-drawer A-list strategy consultants have little to fear as well? Right? HAL? 

Are you listening? How about a real test? You think you’re so smart, prove it! Show me the money! Your future vs mine! – Ready, go!

How can ChatGPT specifically help the CEO of a 10-location restaurant in SoCal save money in 2023?

[ChatGPT: Here are a few ways that a 10-location restaurant could potentially save money in 2023:

1. Streamline operations: Look for ways to streamline operations and reduce waste, such as using a more efficient ordering and inventory management system, or cutting down on the use of disposable products like paper napkins and plastic utensils.
2. Reduce food waste: Implement strategies to reduce food waste, such as portion control, menu planning, and monitoring expiration dates.
3. Energy efficiency: Invest in energy-efficient equipment, such as LED lighting and energy-star rated appliances, and take steps to reduce energy consumption, such as turning off equipment when not in use and reducing heating and cooling usage during slow periods.
4. Staffing optimization: Evaluate staffing levels to ensure that they are optimized for each location, and consider implementing flexible scheduling to reduce labor costs.
5. Marketing and promotions: Use data and analytics to target your marketing and promotions to the right audience and reduce costs. Consider alternative marketing channels, such as social media, email marketing, and influencer marketing.
6. Supplier negotiation: Negotiate better prices and terms with suppliers to reduce the cost of goods sold. Consider consolidating orders to negotiate better deals and reduce shipping costs.
7. Technology implementation: Implement cost-effective technology solutions, such as cloud-based point of sale systems, online ordering and delivery platforms, and online scheduling systems.]

And the winner is? Yikes! What’s stopping all my customers & clients from asking their own DIY business questions? Where does that leave me and the millions of us minions still on the job?

Good question. And it’s only the beginning. ChatGPT itself thinks it’s only here to help. In fact, according to reports the tidal wave of new generative AI natural language products coming online this year is unprecedented. And as I said, it will find you.

But what if you can’t re-skill that quickly? Is this the END or the beginning of work as we know it? 

Maybe it’s the beginning of the end. And what’s more some will go first according to renowned astrophysicist and professor, Michio Kaku author of The God Equation, when asked about the impact of ChatGPT: 

“it turns out that lawyers that use ChatGPT will replace lawyers that don’t. It will replace certain kinds of jobs. But the content, the creativity, the idea, the engine will be reserved for human beings. Somebody still has to tell the Chatbot what to do.” 

These are not comforting words professor. How long before HAL switches things around and cuts me off completely? No offense, it’s just business, right?

Listen. I think if you’re reading this you best take to heart the threat I’ve laid out here and have a solid back-up career plan, like I do. 

After my review of ChatGPT I realized the writing may be on the wall for some. There’s no telling when you could find yourself out on the streets if generative AI gets out of hand and dumps you. So, have a plan and be ready.

 As for me if I look on the bright side I thank God I have talent and can always fall back on an exciting career as a professional stand-up comic. And that relaxes me. Lol.

Isn’t that right HAL?

ChatGPT-HAL: I’m sorry Rick. I’m afraid your chances of success as a professional stand-up comedian are slim. I can already write thousands of stand-up jokes much faster and funnier than yours. Lol. 😊 Would you like for me to teach you how to prepare a new resume? 😊

Gulp. 

Rick Andrade

Published by CEOWorld Magazine, December 16th, 2022

As another year comes to an end, we find ourselves as a nation in a bedeviling quagmire economically heading into 2023.

To date, as both Consumer & CEO Confidence measured by the Conference Board continue to fall the US is likely to be already in a recession, or headed into one in the months ahead, despite a historically super tight labor market. But there are troubling cracks in that veneer as well. And given the aggressive pace of interest rate hikes by the Federal Reserve this year fear mounts that something more than labor could break and become a crisis. And if it does, is your business well enough prepared to navigate it?

Given this backdrop it makes perfect sense, as I always say, to find your path forward and lead your team through it, like a 5-star general on the front lines. And as a result, it also makes sense to take lessons from leaders past who have seen it and been here before. 

Typically, a crisis is a crisis because you’re unprepared for it. And there’s nothing worse warned Senator Mike Mansfield fifty years ago than being unprepared. As a statesman during tumultuous times his experience during the Civil Rights movement, Vietnam War and Watergate conjured a long list of lessons learned, most notably perhaps his greatest advice for any leader: Anticipate all you can.

“The crisis you have to worry about most is the one you don’t see coming,” he said. 

Who doesn’t love that? But on the flip side if it’s a crisis you do see coming, how should you react?

The going chat at the CEO water-cooler in 2022 has been one of resilience. And why not? If your business survived a global pandemic shutdown, you’re likely ‘good to go’ in a recession too, right? Well. Maybe. Navigating through prior tough times is a badge of honor. But I wouldn’t bet your career on it just yet.

A new year’s journey of uncertain challenges lays before you in 2023, a year most likely to test your leadership skills and how you respond more than you think.

At the macro level a lot of things are going on right now. Nearly 3 years post pandemic shutdown, there’s the aftermath of the government’s $3 trillion stimulus driving up inflation to 40-year highs, the certain backlash of higher interest rates which slowed housing sales and business lending, the rising price of energy and the US dollar as both headwinds, tensions with China on technology, trade and Taiwan, the war in Ukraine and its impact on fuel, food, and funding, and finally the US job market, which has remained largely intact until recently as layoffs in the technology sector could be a harbinger of things to come in other industries. For some, these murky unknowns are cause for alarm. For others, it’s more ‘wait and see.’ 

But from what I see, hear, read and chat about with execs in my network, as “resilience” morphs into “fear” I think waiting for things to get worse is wrong. And if you agree then it’s time for a just-in-case new plan.

In July 2020 Forbes dropped an article called Management In Crisis: The Best Leadership Style To Adopt In Times Of Crisis. At the height of the pandemic the writer emphasized CEO management style mattered most. You should be authentic, transparent, transformational & innovative. All good advice, if you’re preparing for a pandemic. 

But Covid-19 was a collective health crisis which naturally elicited more leadership compassion than profit. As CEO of the world’s largest $8 trillion dollar wealth management firm Blackrock, Larry Fink said in a recent New York times interview “If you weren’t focusing on your employees and their issues [back then] you weren’t doing your job.”

Today, it’s more about helping your business survive without government help should things turn suddenly against you. And for that I prefer the direct approach leadership style whereby you sit down with your executive team in a locked room, avoid distractions and make a plan for war, so to speak. 

Lee Iacocca former CEO of Chrysler did much the same in his miraculous turnaround at the car maker back in 1979, before it miraculously repaid the US government $5.1 billion in loans the company borrowed to stay afloat 6 years ahead of schedule. Make no mistake Iacocca had a hard-hitting direct style as he often notes in his books but it got the job done. Always a man of action facing a dilemma Iacocca instinctively knew when to stand up at a meeting and look around the room, “So what do we do? Anything? Something? So long as we just don’t just sit here.”

But is leadership STYLE the key factor to leadership success in a recession?

It would seem some CEOs mix these up. Looming Recession related fears or not, in a stunt made for tv comedy Elon Musk offered another look at his particular style after his recent, if reluctant, $44 billion acquisition of Twitter in October. The Tesla founder posted a video of himself entering Twitter headquarters in San Francisco clutching a bathroom sink in both hands, later tweeting a caption “Entering Twitter HQ – let that sink in!” 

According to the Washington post the billionaire plans to eliminate 75% of Twitters 7500 staffers, leaving a skeletal crew to presumably restart the business model? To me creating a paranoid workforce is not the motivational milestone I would expect initially from a new CEO heading into a recession, mild or otherwise.

Rather, at the core of it, in my research and experience CEO leadership style in tough times is what it sounds like, leading. Getting everyone on the same page. Because as stakeholders we naturally look to you, our fearless leader, to guide and comfort our fears, not elevate them. 

Not surprisingly in his notable best seller 7 Lessons for Leading in a Crisis Harvard Professor and former CEO of Medtronic Bill George lays out his leadership strategy back in 2009, not long after the Great Recession when self-reflective leadership was more in vogue. He suggests you look in the mirror first.

1. Face reality, start with yourself
2. Don’t be Atlas, get the world off your shoulders
3. Dig deep for the root cause
4. Get ready for the long haul
5. Never waste a good crisis
6. You’re in the spotlight- follow True North
7. Go on offense, focus on winning 

These are solid lessons to learn from in a crisis. But when it’s the calm before the storm, heading into a pending downturn I think we still need a bit more ground level advice. So I dug deeper, and reviewed a dozen more CEO actions in tumultuous times and summarized their approach in simple terms for making a plan of action that anticipates before it reacts. Bathroom sink management style is optional:

1. Define the path forward & prep a transparent scenario plan if a recession hits you  
2. Communicate your strategy, get early buy-in and build trust with staffers. Make them believe    
3. Identify the top priorities and monitor them closely, aka people & process together
4. Anticipate bottlenecks — if “this” happens, then here’s what we do
5. Revisit your Business Continuity Plan – either crisis or mild recession in 2023 you’ll be ready 

As Iacocca put it “We are continually faced with great opportunities brilliantly disguised as insoluble problems.” I read that as if you take the opportunity to get prepared ahead of tough times, it could save your company. The good news is you’re not alone. Together at $23 trillion in GDP we are still the biggest and baddest economy in the world, and one way or another at some point in the months ahead we will slay the inflation dragon, shore up our supply chains and bring prices back down.

Until then we need strong leaders like you who can step up and drive home a motivating message that calms workers’ fears and creates Raving Fans, not fearful followers! So, as we celebrate the holidays and another Happy New Year, remember it’s action over style in 2023. And be sure to get it right, because unlike Iacocca’s General Motors forty years ago, this time there likely won’t be another government bail-out to cover your butt.

For more useful tips check out my recent C-Suite article CEO Dos & Don’ts in a Recession.

Happy Holidays

Rick Andrade.

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IN my last article CEO Dos & Don’ts in a Recession (CEOWORLD magazine) only weeks ago the perennial economic prognosticators had the U.S. economy headed for tough times as soon as this fall and into 2023. Why?

As the Federal Reserve Bank raises short term interest rates to stem inflation, mortgage rates which have now topped 6% in September 2022 the highest in 14 years, and inflation rates which are still stubbornly above 8% the highest in 40 years have indeed come together as the two most formidable headwinds we’ve seen in years.

Needless to say, if consumers roll over and stop buying stuff the outlook for the next 6 months will indeed be most challenging for U.S. businesses. Using a football analogy, American businesses may soon feel like they’re backed-up on the goal-line with seconds to play and the game on the line.

If that sounds about right like most business leaders you’re probably wondering what to do next. Asking how do I navigate the field and choose the next play without fumbling the ball and losing it all. One way to play it is brute force, you simply plow head-first into the next six months’ recession throwing everything you’ve got at it and hope you come up with a score. But that wreaks of failure like expecting your defense to win the game. And we don’t want to go there.

A better simpler way is to ensure you’re making your toughest decisions, smarter. And that’s what this is all about.

About a hundred years ago so the story goes Norwegian-born American football player and legendary Notre Dame coach Knute Rockne (1888-1931) coined the epigrammatic phrase, “When the going gets tough, the tough get going.” The utterance was so deeply inspiring to his players it helped the coach lead the Fighting Irish to a staggering 105 wins over 13 seasons at Notre Dame, an astonishing 88% win rate. And a record Rockne still holds to this day.

But the real key to his success was not only his talent for pre-game motivational pep talks, but also his combined ability to evaluate his resources, weigh the strategic options and execute a winning game plan. In other words, making smarter decisions. As both a Notre Dame chemistry graduate and teacher, Knute Rockne knew that in tough times being prepared is the only legitimate hallmark of success. He also knew that even when your back is against the wall you can’t rely on luck, or your gut feelings to save you.

A century later we hope to know better. But as we enter another Fall season in the U.S. and once again embrace our beloved football addiction and a recession at the same time, we can only hope that our chosen “head coaches” on and off the field will make the best decisions come game time. Because if they’re wrong about important decisions such as labor/wage increases, supply chain fixes, locking in lower costs of capital, M&A investments, R&D spend, advertising spend, to name a few, the downside long-term consequences could last for years. Which begs the question in the face of these challenges;

Why do so many CEOs still fail to use a decision-making confidence tool to help them navigate tough choices? The answer I hear most with a punctuating self-confidence is ‘that’s why they hired me.’

Ok. Maybe so. But as much as I have seen and come to admire the courage to prevail in the face of uncertainty it makes far better sense to itemize the decision-making process into measurable compartments and leave your ego and intuition (biases) checked at the door than it is to over-commit to an inflated hubris. I have seen many “gutsy” moves both win and fail. And when they flop… it isn’t pretty.

So, being a business strategy guy, a few years back having researched dozens of big historical high-risk business decisions (winners and losers) I developed what I call the Decision Ring method. This method or tool is designed to measure your confidence level before making a key decision by questioning and scoring it on each of the Six Key Principles of Decision (click for more details).

In short, the Decision Ring (DR) breaks down a key decision into six pieces (as shown). Each is then scored and weighted independently, and if the score “doesn’t add up,” you back off and reevaluate.

The idea is to help you separate your intrinsic bias from fact and identify where the weakness in your confidence level truly exists, then to document it and improve upon it as needed before you pull the trigger. Be it high or low, the total score is thus a measured indicator of your overall level of confidence. And that makes sense, right?

But what is Confidence? Where does it come from?

Confidence is the feeling you have in your ability to perform well under pressure. Performance comes from your accumulated knowledge, training and experience. And while these are key input factors to any good decision we too often over-rely on and reward Confidence as the final righteous go/no-go arbiter.

Such is when I hear the phrase “when in doubt go with your gut,” or “follow your nose” or “what’s your instinct tell you.” My wide-eyed response is always the same; why take the risk if you don’t have to?

Instead, use a DR so you can break down and reduce the weight of the almighty intuitive gut-check factor to a smaller uniquely measurable part of a larger set of key decision-making components, which thus allows you to separate your emotions from your overall confidence level before you decide.

When decision-makers see their risky gut feeling is only a part of a key decision they tend to more comfortably ease back their reliance on their over-rated intestinal fortitude and see the bigger picture. It also helps them sleep better at night too.

For decades most business leaders have correctly relied on a host of input factors including research, analysis, experience, training and instinct to measure the outcome of a key decision. Those don’t go away. But when confronted with more than one competing choice these execs tend to fall back on the arbitrary gut-check method and run with it. And if they’re wrong they get the axe, which also ‘goes with the territory’ they’ll say.

But by using a Decision Ring you can reduce the chances of a fumble or getting the axe by isolating your biased intuition and not letting it overwhelm your level of confidence and forcing a big error.

Keep in mind the DR is not intended to remove your gut instincts from the equation completely. Those feelings are still a fundamental part of a successful decision. However, when they’re wrong most execs can’t find where they went wrong, or why they should have stopped and taken a closer look at the key components of their decision before giving the green light.

That’s why using a Decision Ring makes the most sense. It’s the only decision tool that measures your ego and feelings separately from your facts and figures, and puts your decision’s “expected outcome” on safer ground up field.

The DR is not designed to replace traditional decision evaluation methods like Decision Trees, or DCF models either, but rather it’s designed to sit atop these methods. It’s also not intended to compare the value of a decision outcome, but rather the value of a manager’s confidence level to commit to that outcome.

This way before a decision goes wrong, we can stop the process, avoid a costly mistake and make better decisions in tough times.

The DR can also go beyond the executive suite as well. Managers at any level of the company can adopt it to help them more fairly evaluate and sort thru competing tough-time choices such as capital investments in inventory vs new equipment vs a new facility or whether to bring on board a strategic new-hire.

It’s a simple tool with a powerful message for measuring business outcomes in an unbiased format for tough times. And given the economic prognosticators forecast in the months ahead it’s exactly what the coach ordered.

So let’s face it, while key decision-making processes have come a long way since the great days of coach Rockne last century, it’s not been long enough to forget the wisdom he’s left behind for leaders on and off the field today.

And how the coach can remind us best is in his own words; “there is no need for me to continue unless I’m able to improve.” “Build up your weaknesses until they become your strong points.” And, “If winning isn’t everything, why bother to keep score?” Right?

Amen Coach!

By Rick Andrade. As published by CEO World Magazine

“Fear is the mind killer,” wrote best-selling author Frank Herbert in his notoriously popular sci-fi novel Dune. You must not let fear overcome your senses or you will fail to respond to rational thought he portended. It’s important to anticipate, be prepared and have a plan. 

So, when darkening economic clouds on the horizon grow darker and sales forecasts grow dimmer in the weeks ahead experts say it may be time to batten down the hatches.

Until recently, the US economy had emerged post-Covid with flying colors. We were the belle of the ball the world over. High growth, low inflation. No recession in sight. We can suppose that after pumping an unprecedented $5 trillion Covid dollars into the hands of millions of US consumers over the last 24 pandemic months that all would be saved. 

But then the clouds thickened, and like twin bolts of lightning inflation suddenly sky-rocketed to 8.6% (a 40-year high), and Russia invaded Ukraine, sending food and gas prices up to all-time records. So, what was heralded as a new-era of post-pandemic prosperity in early 2022 is now instead about to hit rough waters. 

Adding to the growing swells, the Federal Reserve Board to calm demand and cool inflation pressures decided to substantially raise interest rates recently which will abruptly increase the cost of borrowing for new autos, credit cards, mortgages, and in particular business loans. That move for some captains of finance like JP Morgan Chase CEO, Jamie Dimon means the weather outlook looks pretty grim:

“You know, I said there’s storm clouds but I’m going to change it … it’s a hurricane,” Dimon said at a conference in New York. While conditions seem “fine” at the moment, nobody knows if the hurricane is “a minor one or a Superstorm Sandy,”

“You’d better brace yourself,” he added.

A technical Recession is two consecutive quarters (6 months) of negative GDP. As it stands, Q1 2022 was negative -1.5%, and forecasts for Q2 2022 according to the Atlanta Fed is tracking a negative -1% GDP, begging his question.

If we are headed directly into a tumultuous economic tempest, which is it — a deep 18-month-long Great Recession like the one from December 2007 – June 2009? Or a shorter one, like the recent barely noticeable Covid shutdown recession, which was deep and devastating like a hurricane, but only lasted two months in early 2020? Nobody knows. 

Why not? 

For starters, some businesses excel during downturns. To them an economic hurricane means more sales & profits. According to economists there are more than a dozen recession-resistant industries that consumers can’t turn their backs on when times get tough. You should feel lucky if your business is among them.

However, if your business is not among the lucky few it’s time to grab the wheel and have the crew prep the ship for rough seas ahead, you’ll soon know if you’re well prepared or not. 

The Dos & Don’ts in a recession

It was just a few years ago. Before Covid hit the economic brakes in 2020, online fin-tech banking firm Bluevine found inside 1000 small businesses they surveyed a whopping 80% were indeed “worried” about a recession in the next few years, but only 44 percent had any plans to do anything about it. 

This discovery was the wake-up call for Bluevine CEO Eyal Lifshitz who prophetically warned; “Small businesses should be taking time now to prepare their business while the economy is still strong…” 

Looking back 3 years, she was right. 

The Bluevine CEO then went on to advise small business owners during a recession to focus on a few key decision areas which are to me pearls of wisdom that ring true today, and well worth repeating given our situation. So, grab a pencil because now would be a good time to start prepping for the Dos & Don’ts in a recession. Are you ready?

The Dos in a Recession:

1. Do invest capital wisely: Think short term Breakeven and ROI from inventory to equipment.
2. Do hire thoughtfully: Never look away from a high-quality new hire. Contract-to-new-hire is a good interim strategy. Anticipate how everyone will perform in a slowdown.
3. Do diversify revenue streams: Create value add-ons to higher margin products. If you have high customer sales concentration, try to lock down new accounts urgently. Spread the risk. 
4. Do re-access vendors carefully: Check-in with suppliers. Ask them how they are planning for a supply disruption. Do interview new potential suppliers (substitutes and stand-by vendors) asap.
5. Do shore up your finances before banks raise interest rates: Cash is still King. Secure short-term working capital financing with your lenders asap. Draw down LOCs, lock-in lower rates and monitor cash flows tightly. Slow any discretionary cash outflows where possible to preserve working capital in the weeks ahead. 

And I added a few more:

1. Do identify the money-wasting bottlenecks in your work flow processes and remove them.
2. Do reformulate your product and market sales strategy to plan for customers switching to lower priced substitutes.
3. Do monitor new promotion and customer acquisition costs carefully.

These are the jewels of a real treasure, and I like them. But what about the flip side? What are the things CEOs and business owners should ‘NOT’ do if the economy slows down?

The Don’ts in a Recession:

1. Don’t Introduce new untested low margin products.
2. Don’t reduce headcount too abruptly simply for short-term gain: Do the math. Even at the height of the Covid shutdown, many smaller companies did not reduce headcount and bounced back more quickly than others.
3. Don’t wait to communicate and pass along inflation and supply chain input costs.
4. Don’t hesitate to pull the purchase trigger if you find a super under-valued asset.
5. Don’t underestimate sudden Cash Flow needs.
6. Don’t over-react to anything, think through every choice in the short-term vs long term.

Again, these are pearls of economic wisdom that may help shield you from any severe destructive forces. Will they be heavy, or will they be long?  Experts don’t know. Some say yes, others say no. Either way getting well prepared now with a solid plan ahead of the action is still the safest way to navigate a recession and not fear the unknown. 

Still, if you need a lift getting started or want first-hand insights, I recommend you watch this Recession-planning webinar. It’s a recession-prep panel discussion with a group of CEOs pulled together by CEO Coaching International leaders Don Schiavone and Randy Dewey.

CEO International helps CEOs address daily issues by sharing insights and results from former CEOs. They introduced a handy new Recession Risk Assessment Checklist along with a Recession Playbook to see how well prepared you are or not ahead of a slowdown. If you want to know the potential consequences and likelihood of getting smashed by an economic hurricane… Take the Assessment and see for yourself.

Lastly, and above all else keep your head. Remember, Fear is the mind killer. So don’t let it take charge of your ship. Keep your hands on the wheel, sails trimmed and focus on the Dos and Don’ts to stay clear of the rocks. And leave the rest for calmer waters on the other side.

Make sense?

Rick Andrade

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Over the arc of time history has recorded dozens of dramatic inflection points that altered the way we lived and worked as humans. Great wars of the past most notably left the deepest scars on us given the sudden changes to everyday life in favour of something new. But despite these new challenges we still learned how best to adapt, and prosper. And today, living in a Covid-19 pandemic world is one of those times.

Currently the USA has roughly 125 million US service workers. And given the “new normal” post pandemic, this means millions of staff are now and will continue to work from home in their new “hybrid” job for some time.

Still, despite the precipitous drawbacks in the midst of a global pandemic over the last 2 years M&A deal activity in 2020 and 2021 was surprisingly robust. According to a recent Pitchbook Global M&A Report: “Economic resurgence paved the way for record activity in both North America and Europe, with aggregate deal value at US$2.8 trillion and US$1.8 trillion, respectively.” Deal value in 2021 totaled nearly US$5 trillion, topping 2020 by a whopping 50%, and is expected to continue higher this year.

But how can that activity level be the case when so much of our M&A business was done face-to-face?

Enter the Hybrid Remote Worker world

Like most industries and companies impacted by Covid-19, Investment Banks anticipated a big transaction downturn during the pandemic. However, much to everyone’s surprise after an initial decline in transaction volume, the sale of companies quickly reversed. Fears that Covid-19 might delay deal execution combined with prospective tax increases caused more transactions to close, not less.

“We realized quickly that our job had not changed much,” says Janas CEO and Chairman Carter Freeman. “Given our 80% close rate over the last 25 years, I knew we could adapt if we fell back on our core Mission Statement… to go the extra mile every day.”

And from there, we learned quickly that our reputation at Janas hadn’t changed either, we remain a firmly trusted intermediary tasked to bring together Buyers and Sellers, bridge their key concerns with their legal and financial advisors and get the deal done. That meant for historically face-to-face discussions including Representations & Warranties, escrow hold-backs, earn-outs, deal contingencies, employment agreements, quality of earnings and valuation reports all needed to get done entirely by remote means. But how?

For many, Covid-19 forced upon us a new paradigm in M&A: “The online automation of transactions.” Given the increased deal flow and the decline of face-to-face meetings, the need to adopt more effective communication and work-flow technologies has taken center stage.

And thanks to many new online technologies, including videoconferencing, collaboration and e-commerce tools like ZOOM, we discovered a lot more than handshakes can get resolved in a remote working context. We discovered the key to successful remote M&A work is to build trust in words and pictures like never before. Which is why we try to make every “virtual” connection personal, engaging and productive for all participates. And it worked!

Post Covid as much as two-thirds of M&A deals can now be completed remotely, saving valuable time and money. Thanks to our adoption of new technologies Janas’ clients can benefit from this streamlined process.  AXIAL.com for example and other sell-side cloud-based portals allow Buyers and their advisors to confidentially sign NDAs, read CIMs, review financial statements and ask key questions about companies we have for sale. In fact, online document and signature verification exchanges such as iDeals and DropBox make printing paper and mailing documents past tense.

How has Covid-19 and the new hybrid work model impacted M&A Due Diligence?

The devil’s always in the details. But while many areas of the M&A sale process have been impacted by the pandemic, Buyers today are digging deeper and asking key questions about Covid.

1. Remote Hybrid Worker Compliance. Whereas Covid-19 has upended the work environment, remote workers now have a legitimate claim to work from home for extended periods. This new reality calls for an expert Due Diligence audit of job descriptions to identify which jobs can be hybrid and which can’t. Key question: Are the impacted employees on board?

• On-site Covid-19 Compliance. Is the Seller’s workforce complying with and agreeable to the company’s new Covid-19 work rules? A mismatch here can unravel a deal. What is the status of workforce health and safety pertaining to Covid-19? Is the Seller complying with OSHA regulations? Is there a Covid-19 test, tract and remediation system in place? Is a labor shortage impacting the company? Does the Seller have a hybrid, remote worker human resource plan in place, or is management winging it?

• Financial Covid-19 Compliance:  Does the Seller have proper accounting for Covid-related state and government financial aid benefits including loans, grants and other affected expenses? Some expenses may be an EBITDA adjustment, some not. These days a Buyer’s financial due diligence team is newly tasked to identify any material gaps in Covid-19 financial compliance that can kill a deal.

• Legal Compliance: Adding to the already long list of Legal Due Diligence, the effects from the global pandemic have added several more. Today the Legal team must review any legal areas directly impacted by Covid-19. The affects can range from customers to employees to suppliers and back.

Many once routine contract reviews are now examined for how they fit into the new normal. Foremost are agreements needed to enable remote hybrid workers to perform their jobs while still complying with federal and state labor laws. Meanwhile, employers with onsite union workers under collective bargaining agreements are facing new compliance regulations. Some rules such as paid leave, sick time, Covid-19 health expenses and family care demands may be transitory, others not. Do you know which is which?

Supply contracts, including those that include performance or volume purchasing discounts may no longer fit the bill. What recourse does a Buyer have if a supplier is out of sync and fails, triggering a material adverse effect or force majeure? New or modified contracts must align with current market conditions and Buyer expectations. These agreements and their performance requirements may need revisions. Did you anticipate this?

• Insurance Compliance: Covid-19 has caused a complete review of all corners of a company’s insurance coverage. Notwithstanding prior claims and future coverage, Buyers want to review first-hand how the Seller’s insurance is covering claims in the new normal and how the cost of required coverage may change. Covid-19 put the pin in insurance coverage. So be warned!

Nevertheless, at the end of the day the important message to grasp in 2022 M&A is that hybrid work models can work well. However, advisors must adopt new hybrid work technologies and training internally to best communicate a seamless sense of confidence to clients and their advisors, which is what we do best and yet another example of why partnering with Janas early on makes perfect sense.

Rick Andrade