A story in the WSJ got me trying to excel tonight at the Traveler IQ online game. Well, there went the evening. God, I thought I was so much better at geography. Depressing.
I recently spoke at Yahoo! about the book, and, for this presentation, I adapted the Agenda Detection and Meeting Creatures chapters into a piece about how I assess agendas and people in the first 10 minutes of any meeting.
Early on in the presentation, I asked the audience, "What are the things you are supposed to do to make a successful meeting?" First hand: "Make sure everyone closes their laptop." Yes. Full agreement from me. If you're sitting in my meeting and your laptop is open, I promise, I swear -- you are giving me half of your attention. Maybe less.
The Yahoos couldn't drop the topic. In Q&A, the laptop question came up. In the post-presentation mingle it came up again. Everyone wanted to know if there was a situation where it was OK to whip out the laptop.
My answer, over and over again, is "No."
Now, this is religion and not reality because it's likely I'll bring my laptop to a couple of meetings this week, but I am ultimately fucking up by doing this. Here's why.
Laptop Tolerance
There were three different angles the Yahoos tried on me, and I have an answer for each:
"What if I'm taking notes on my laptop?"
This is how laptops got invited to the party. Pre-wireless-everywhere folks were using their laptops as note-paper. This is fine, but nowadays, are you really just taking notes? Really? It takes one lull in the conversation to get bored and starting glancing over at CNN, and in that moment I might say something you need to know and you missed it because you stopped listening. So, what are you doing in this meeting? If you're going to ignore me, you can just as easily do it sitting in your office.
One solution to this problem is to leave the laptop in your office and bring a nice, bright sheet of white paper to the meeting. Try it. When forced, you might even find something interesting in the dull parts of the meeting.
"I'm required to go to this meeting and I have no role, so I bring my laptop to get work done."
I have two answers to this. First, why the hell are going to this meeting if you have no role? Second, even if you don't have a role, how do you know you don't have a role? If you're sitting there ignoring whatever is being said while you're scrubbing the bug database, you have nary a clue what is being talked about.
When I'm forced to go to a meeting where I have no obvious role or responsibility, I give the meeting the benefit of the doubt and listen hard. What is going on here? Do I care? How can I help? With all the wonders of the Internet sitting on my MacBook Pro, this can be tricky, but what I'm trying to figure out is if I can add any value in the time that I'm required to sit there. If, after a few meetings, I'm certain I'm a) not going to learn anything, and b) can't add any value, I stop going to the meeting. Consequences are forthcoming, but more on that in a moment.
"I run the meeting and they're not respecting my laptop policy."
Some meetings involve piles of people, and this creates a comfortable anonymity where attendees ignore the no-laptop policy and type away. My advice here is to politely remind everyone of your policy. Still a problem? Remind them again. More typing? It's time to remove these people from the meeting.
Being a meeting jerk has consequences, but it's those consequences you want to face because you've got a bigger problem than people ignoring your meeting.
The Herring
All this focus on laptops as the problem is a red herring. Whether you're running a meeting with a rampant laptop problem or sitting in a meeting where you have no role, the actual problem is that someone doesn't understand the value of the meeting.
No, it's actually worse.
The problem is that everyone attending this laptop-laden clusterfuck is subconsciously hearing "Hey, in this meeting, it's A-OK to waste people's time."
My question is: "When is it ever ok to waste people's time?"
You're on the defensive now and you're thinking "But Rands, while I'm not actively contributing to this meeting, I am getting work done on my laptop." No, you're not. You're giving the same partial attention to your laptop task that you're giving to the meeting. You are doing two things poorly rather than one thing well.
The solution here is simple. If you're in a meeting where you have no role such that you're tempted to stare at your laptop: stop going. If you're running a meeting infested with laptops and, after repeated gentle reminders about your no-laptop policy, there are still laptops: remove the laptop offenders from the meeting.
This brute force approach strikes me as being a violation of the Rands "Don't be a prick" policy, but frequent readers know that not being a prick is always trumped by the even more important policy of "Don't waste my time". Besides, being a prick is going to have some interesting side effects.
Standing Meeting Momentum
Meetings become part of organizational culture. Just like any organization has a healthy layer of baffling acronyms, they also have a set of core standing meetings. Some of these meetings have been around forever and have a life of their own.
Thing is, in the five years that you've been working at that company, the company has (hopefully) changed. More importantly, so have the employees. So why in the world do we still have that useless product status review for everyone on Tuesdays at 4pm? I can get all the information from the wiki Frank set up.
If you have no role in a meeting and stop going, or if you remove someone from a meeting, you're going to create a conflict with whoever believes that you (or the other someone) should be in that meeting. This is great. This is the discussion you want to have: "Frank, I've been to this meeting 12 times and I've no clue what I'm doing here. Please advise."
Maybe Frank has some insight for you. Maybe he can explain some strategic shenanigans that will adjust your perspective so that your first reaction in this meeting isn't to surf the popular videos on YouTube. If Frank can't clearly explain why you need to be there -- guess what -- I've just saved you 30 minutes to an hour each week. Please consider this an early Christmas present.
A bunch of people sitting in a meeting, staring at their laptops, is a fat meeting. The people sitting at their laptops have no incentive to change a thing because they're lost in whatever has captured their interest on their laptops. This is a lazy meeting full of people who are ignoring the most important question: "How do we figure out how to never have this meeting again?" Even worse, an organization that lets this meeting exist is a rotting organization. It's a company where it's slowly becoming acceptable to sit there and do nothing.
A meeting must fight to exist. It must defend its existence to its attendees who should constantly be asking "Why are we here?"
Now you understand the other thing I do in the first 10 minutes of any standing meeting: I think about how I can kill it.
Here's an email I received late yesterday from a friend, "R," who was in the CDO business from way back when to right through the past few years.
"R" writes:
"I've been paying attention to your macro economic call lately and you're right on. Three anecdotal stories for you that you can use on Kudlow. (PLEASE don't mention my name).
1. XXXXXX and I were talking in 2003 about how shaky these low FICO, high LTV, 2/28 ARM's that were being created were. People in the know knew then those loan products were going to be a problem in the future. Way back in 2003, it didn't make sense.
2. In early '05, XXXXXX tried to hook me up with a HF he knew that wanted to play the CDO issuer game. I talked to the guy and told him that at the risk of talking them out of hiring me, I wouldn't do it. I thought that game was topped-out even back then. A bit early, but perhaps the right call.
3. I was talking to CDO managers in mid-'05 that were saying how rich sub-prime MBS was and how wrong everyone was for buying that stuff at the spreads they were. To a man, they all agreed they were paying too much for the risk, they all believed that HPA [ED: home price appreciation] was going negative soon. But, sadly, they had to buy the stuff because they needed to accumulate collateral for their CDO issuance. Fuck, we all knew we were overpaying, even back in 2005. We knew it was essentially a bet that home price appreciation was going to continue at levels that couldn't be sustained. No way that could keep going on.Everyone was saying the same thing: Home pricing cannot continue appreciating at the same rate, and the second this thing turns, we are FUCKED.
Is it really any surprise to anyone that the mortgage business got too far ahead of itself? To me, the only surprise has been it took so long for all of this to happen."
So what was the prime motivating factor?:
"The answer is quite simple: DEAL FEES. I gotta keep buying collateral, in order to keep issuing these transactions as a CDO manager. Its my job: I gotta keep accumulating collateral, and I gotta issue the liability against that collateral.
In 2005, we all said "I hate the real estate market, I hate the credit spread, but my job is to keep doing this: Buying Collateral and issuing CDOs. Everyone was the buying this shit to do any deal. The greed went thru the whole chain, from the home owner buying a property they couldn't afford right up to the CDO manager buying subprime paper."
Why did these managers keep buying this bad junk?:
"Well, nothing is "bad junk" -- it's just priced wrong. No one believed the under-performance of these MBS loan pools would ever be so severe. Everyone knew in the back of their minds that the possibility existed, as did the possibility that residential real estate prices would move LOWER someday.
But no one wanted to be the first to acknowledge it fearing that they'd miss the opportunity to participate in big fees, big alpha, etc. . . ."
Thanks, R. Great insight from inside the belly of the beast.
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UPDATE: August 24, 2007 3:49pm
R asked me to add the following:
"I hate the fact that I'm getting pulled into this, but I'm seeing the need to clear a few things up.
1. To Fred or MS, I "had a spine" by walking away from an opportunity to start up a CDO management business at an established hedge fund company in '05. Everyone was going the same way on that trade, the collateral sucked, and HPA was maxing out. What I told Barry about were my observations from daily interactions with buyers of sub-pime HEL's as collateral for their CDO transactions. My role then was on the sell-side. Minds far smarter than mine were eager to accumulate this collateral. Fraud? Nothing fraudulent at this stage of the proccess. If there was fraud, reading an offering memorandum and monthly remittance reports cover to cover or spending hours of cash flow modelling on Intex wouldn't have shown it. Oh, and where was the fraud? My opinion; mortgage brokers possibly lying about and jamming loans into the wrong people to get fees from the lenders. My view on the relative value of sub-prime HEL's during this time period was not nearly as upbeat as others in a world where EVERYONE else was a buyer.
2. Eclectic, it's not quite as disgusting as you might think. Everyone knew the bet they were making; a combination of HPA and continued positive loan performance would continue sans interruption. It was a market call, similar in concept to the market calls most of you reading this make each day in your chosen financial markets and products. It was a bet that the collateral was going to continue doing what it was supposed to. It's a bit annoying when the "talking heads" claim that institutional investors and HF's buying these products don't know what they own. Bullshit. They know. They own a bet on Average Joe's house staying equal or going up in value and his continued ability to make his loan payments.
3. Stuart got it right, unfortunately. In a capitalist society, one sells what people want. And they wanted sub-prime HEL's with HUGE credit spreads such that the arbitrage was bigger. How is that huge credit spead possible? Lower quality loans; low FICO's, low LTV's.
Thanks Barry. I really want these folks to read this extra detail in an effort to clear up mis-understanding."
That question may be the key to the future actions of the Federal Reserve. One estimate of "How Low Will Housing Go?" comes from Jan Hatzius, Chief Economist of Goldman Sachs:
"Our working assumption has been that US home prices are about 15% overvalued. This relies on a simple "affordability" measure which essentially adjusts the home price/income ratio by the level of (nominal) mortgage rates. Depending on one's assumption about income growth, the likelihood of overshooting on the downside, and the length of the adjustment process, this suggests cumulative nominal home price declines of 5-15% in the next few years.
However, affordability is becoming an increasingly problematic concept because it ignores changes in credit availability and changes in nonconforming mortgage rates. Hence, it may be better to look at simpler price/income or price/rent ratios to get a sense of house price valuation. These paint a more dire picture.
Even if we assume that the long-term trend for price/income and price/rent is higher now than the average of the 1975-2000 period (because interest rates are likely to stay lower), cumulative nominal price declines of 15%-30% are possible."
That's not so different from what HSBC HomePulse wrote back in January 2006:
"We suggest that about half of the US housing market is frothy and that this 'bubble zone' may be overvalued by as much as 35-40%, after taking into account low interest rates and tax advantages.
Current valuations imply a large permanent reduction in the risk premium and/or a sizable step up in future capital gains, not all of which, we think, is justified. The 'bubble zone' accounts for 50% of US GDP, or over USD, nearly the size of the German, French, and UK economies put together. In other words, it's big. Therefore, when these housing bubbles begin to deflate, it is likely to have substantial macroeconomic consequences.
What's troubling is that even a perfect 'soft landing' in the form of flat national house prices would be consistent with a 35-40% collapse in existing home sales. The gush of liquidity from mortgage equity withdrawal would dry up, resulting in a growth drag worth over 3% of GDP. If this adjustment can be managed over many years (and hopefully it will), the economy can avoid recession and get away with soft growth.
If the process is squeezed into a shorter time frame instead, then recession is probable, forcing the Fed to once again consider unconventional policy options - a probability that would only rise if the money supply were to decline at the same time the 'bubble zone' deflates."
Whenever I hear anyone suggest that these events were totally unforeseeable, I know that person is full of $%#*.
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Source:
A Froth-Finding Mission: Detecting US housing bubbles
HSBC Macro US Economics, January 2006
http://neweconomist.blogs.com/new_economist/files/HSBC_frothfindingmission.pdf
