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So Why Are We In A Recession, Business Owners?

A behavioral psychologist won the Nobel Prize in Economics. This is a first person not trained as an economist to scoop the award. Daniel Kahneman invented a new field in economics examining how rational the markets truly can be with human creatures and our emotions messing around. Kahneman explores the consumers' irrational decision making and, even more fascinating, studies Governments and discusses how their political agendas will interfere with rational, thought through decisions. 
When I did my MBA, the case studies and the theory are seductive because they make you believe you have power and control. Time and outside forces then put everything you learned on the MBA on hyper speed. It is never simple in the real world.
Kahneman does tackle why business owners are sitting on the sidelines:

Why are we in a recession? Taxes are too high, say conservatives and free-marketers; thus, entrepreneurs have no incentive to invest or create new jobs. Demand is too low, say liberals: if wages were higher—whether paid by private employers or subsidized by government—consumers would buy more, and entrepreneurs would then produce more and recruit new employees.

Well, as a business owner myself, I hire people and I do not want to fire them, ever. Over the past three years, my business bank balance has been swinging between having to close down and then being at over-capacity. Yes, it is that psycho right now and my bank manager is no longer caught up in the spirit of the 1990s. Every two weeks, I am responsible for my employees' pay checks, their families and homes. I had better have a full pipeline of great private equity projects for the next year. 
Why would I take on the awesome responsibility to ensure long term exciting employment for new people with the chaos going on with the governments in Europe and the US? (Thank goodness for our baking system and for our bland government.) When we talk about strategy planning, at first we think big which has driven our success in the past, but there are too many "what if's" to make growth a top objective. We are going down the rapids right now - not the time for anything fancy, just keep paddling through the rollers.
The uncertainty of government policy in the US is also having a huge impact on many company's business plans, not just my business strategy. The EPA changes has just removed $20M from one of my client's 1914 projections. The EPA change might happen, or not. Meanwhile, we plan for the worst. 
This is an interesting article because we are witnessing governments playing huge stakes with economic theory. If you need a brush up on the big themes, here you go:

 Kahneman does not contradict Smith’s self-love or Keynes’s animal spirits, but he elevates them from intuitions into something like hard scientific evidence. As his important new book Thinking, Fast and Slowdemonstrates, economic behavior can be better understood through scientific and psychological experiments. Most of the book describes the psychological experiments that Kahneman and his colleagues conducted to understand how people judge and decide. Kahneman concludes that our minds are divided into two very different operational systems: System One is fast, intuitive, and emotional, while System Two is slower, more deliberative, and more logical. The former can result in erratic decision-making and even in compulsive behavior, like buying what we don’t need; the latter leads to slow, deliberate choices. In daily life, we constantly and intuitively shift from one system to the other, depending on circumstances; but external incentives—well understood by marketing experts—can activate one system against the other.

Kahneman’s theory is in tension with another influential economic and psychological doctrine: rational-action theory, or RAT, whose leading proponent is University of Chicago economist Gary Becker. According to RAT proponents, people behave “as if” they were rational, whether in their personal lives or as economic actors. On this view, markets are generally rational and efficient, while government interference means less rationality, less well-being, and less happiness in society. Yet if RAT is true, behaviorists ask, how can we explain manias, bubble speculation, and self-defeating choices—none of which, moreover, depends on government? Becker and other RAT theorists accept that the market may not be fully rational, but they don’t believe that the government is any more so. 

Read More here

Read about Jacoline Loewen's opinion on quotas for females on Boards.

Name the top country to do business?

Can you believe it - Canada is #1 on the Forbes list for Best Countries to do Business. The way we talk about ourselves, you would not know it though. 
Kudos to the Conservatives for working so hard to make Canada far more competitive. They have been meeting with entrepreneurs and listening to their issues.

Canada moves up from No. 4 in last year’s ranking thanks to its improved tax standing. It ranks ninth overall for tax burden compared to No. 23 in 2010. Credit a reformed tax structure with a Harmonized Sales Tax introduced in Ontario and British Columbia in 2010. The goal is to make Canadian businesses more competitive. Canada’s tax status also improved thanks to reduced corporate and employee tax rates.

Contrary to the US government's speeches on raising taxes on their corporations, it does impact on their competitive standing.

The U.S. ranked No. 10, down from No. 9 in 2010. The world’s largest economy at $14.7 trillion continues to be one of the most innovative, ranking sixth in patents per capita among all countries (No.7 overall Sweden ranks tops for innovation).

What hurts the U.S. is its heavy tax burden. This year it surpassed Japan to have the highest corporate tax rate among developed countries. The U.S. also gets dinged for a poor showing on monetary freedom as measured by the Heritage Foundation. Heritage gauges price stability and price controls and the U.S. ranks No. 50 out of 134 countries.

Now would someone call Huffington Post and inform their blogging community as most of them do not have a clue about their taxes and economy.
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Gloria Steinem is too political in Toronto

Vanessa Grant, McCarthy Tetrault, kindly invited me to hear Gloria Steinem speak in Toronto. Gloria is an admirable person who has made a huge change in attitudes in society and I was excited to hear her speak and wondered what her message would be.
It was disappointing to hear her start with the right wing's attitude to women's reproduction. According to Gloria, the right wing only want hearth and home and sex is for the reproduction of the species, nothing more. This Footloose style attitude has certainly not stuck around in Canada and as I sat with a table of dynamic female lawyers, all partners at McCarthy, I wondered if Gloria's activist message no longer had the same urgency for North American women.
I also wondered if the American right wing did believe that sex was all around procreation. Quite the image painted by Gloria.

Business must be about values

Ultimately, the finance industry is about trust. The regulators and government can bind up the gigantic finance industry with the tiny ropes of many rules, but like Gulliver, the finance industry will find new ways to free itself.  Business in finance must come down to good human decisions made every day. These simply are too many to be restricted and guided by well meaning government and regulators hovering nearby.

I was at a recent finance event held by CIBC for their partners in the lending industry and was struck by how many of these industry leaders lowered their voices and expressed their concern about the values, or lack of, spreading across the banking industry. This decline in values is a contagion that threatens the investment industry and our economic health.
In the Nineties, companies did spend a great deal of time - and money on expert fees - discussing "Values" and building Values statements. The process of having employees ponder what makes the bank successful over the long run is what counts, along with the interest and sincerity of those executives managing the banks. At the same time, top bankers had to understand numbers and financial instruments like swaps, but to climb your way to the top, you also had to have a strong sense of people.
Sadly, Values consultants got a hold of the concept and many turned a valid part of working together into phony processes not run by the leaders and the output were oily values statements - just adding to cynicism.
I have mentioned before that my uncle ran the insurance division of the Royal Bank of Scotland, and was appalled at the upcoming leadership as the men were purely financially driven. Their lips would curl at the suggestion of having a process for employees to talk about what is the best code of conduct for bank traders to hold in their hearts.
Knights of the Round Table stills fascinates a large audience of young people. What is it about this ancient tale of a Kingdom long ago?
Perhaps it is due to the loyalty of all the knights to help each other and that invisible moral code that bound them all but also made them the best in the land.
As we think about our financial leaders, do they have a moral code that guides their employees? How involved are they at demonstrating daily how to behave? How does each bank leader demonstrate how to make profits? What is the message given on treatment of all clients of the bank - including those faceless traders on the other side of the world who were sold those viral derivatives with mold infested mortgages.
Here in Canada, we are fortunate in our bank leaders like Gord Nixon and Ed Clark. They have risen through the bank hierarchy and are what my uncle would call "true bankers", not the fast thinking corporate finance types who financial engineer profits.
Can the banking and investment system lead the way back from the edge of this madness and build back the trust? How will they demonstrate that business - everyone's business - needs to be built on strong values.
The UBS trader is the most recent rogue trader bringing down the value of a bank. His friends say he was a nice fellow so what happened in his mind? What was it? Greed or pride? I would prefer the latter. On his final Facebook page he asked for a miracle. Could he have done with more emphasis on values?