More CEOs Have to Go

fired4On Sunday night came the stunning news that GM CEO Rick Waggoner was going to be ousted from his job. Waggoner had been there for decades, so he could not hide behind the fact that he was a relative newcomer to the industry (Bob Nardelli of Chrysler can make that claim). Since GM had lost a whopping  $80 billion dollars, his firing should come as little surprise. The company had also received billions in bailout money, and is still teetering on bankruptcy.

Where have all the  leaders gone? The truth is that the most authentic leaders don’t wait to be fired when things go desperately wrong. Take the former CEO of Siemens—Klaus Kleinfeld—who is now CEO of Alcoa. When there were alleged wrongdoings in his company, he resigned from his post, even though he, personally, had done nothing wrong  (in the interest of disclosure, I had co-hosted a leadership seminar at his firm).

There are two situations in which  someone should voluntarily step down from their office, making room for new blood:  

1. When confidence in your firm has eroded so badly that no one believes you anymore;

2. When you have lost the company so much money you cannot even count it, even if it was given to you in thousand dollar bills.

If you are a CEO you know if either #1 or #2 or both apply to you. If they do, fall on your sword and leave voluntarily. You probably will be helping more people than you know—including yourself. That’s because it will free you to find another post that may fit you far better.

Wall Street is Schizophrenic over Tim Geithner

target1Last November—when news came that Tim Geithner was going to be tapped as treasury secretary, the stock market soared. It not only soared, it had one of its best days in history—rising by more than 500 points to regain the 8,000 mark once again.

Then came February 10th when the Treasury Secretary announced what amounted to “a plan for a plan.” Wall Street hates plans for plans—that’s because it abhors uncertainty— and sunk the market to the tune of almost 400 points, and an even greater percentage on the S&P (a 5% haircut).  Many barbs were tossed in Geithner’s direction along with calls for his head.

Then this week comes the actual plan to get toxic assets off the books of banks. Geithner is a man with absolutely no charisma. But as Peter Drucker taught us, charisma is not leadership, it is “how to make friends and influence people.”  The President was the one selling the plan to the American electorate, as Geithner presented the plan to reporters behind closed doors. Whomever sold it. Wall Street loved it 

Since then, Geithner has had a much easier time testifying beforre congress. The Dow is up a stunning 21 percent in thirteen trading sessions, which  technically constitutes a bull market. The Treasury Secretary found it much easier to talk to politicians when the market is soaring.  

 On Monday the stock market got back what it lost on that infamous February day and more, rising just under 500 points (nearly 7%) Monday—the fifth largest point gain ever. And we are about to close out our third week in a row with solid gains.

One of the real sparks to the market is the toxic asset bank program. We finally got the details, and anything that even looks like an actual plan was going to bring life to the market. The government is still financing the greatest part of the purchasing of toxic assets, but this time some private money should enter the picture. As long as the markets continue to rise—both the stock market and the credit market—taxpayers and private institutions, will make money. That didn’t stop some high-powered economists like Paul Krugman to declare the plan a complete failure before anyone had a chance to see if the plan had a chance! 

As for Tim Geithner, he is still in the “what have you done for me lately”  business, and  more than any other Obama cabinet member, likely to stay in the crosshairs for the duration. Everything he says or does is likely to be examined under a Wall Street microscope, and if Wall Street doesn’t like what they hear, they will shoot more poison arrows at him until they get their way.

As for me,  I’m in the minority. I think Geithner is going to  help lead us out of this mess, and will be heralded as one of our most effective Treasury Secretaries in history.  Not that there won’t be bumps along the way. We all need to fasten our seat belts and hold on for a wild ride.

Keep Your Eye on the Ball

The pitchI woke up this morning, brewed a cup of coffee and flipped on “Morning Joe,” MSNBC’s political news program, like I always do. For about the fifth day in a row the hotly-debated topic under discussion was the same: AIG. Not just AIG, but how AIG, in good conscience, can give out $165 million in bonuses, while we, the taxpayer, own 80 percent of the company though our $175 billion investment in the company. This is very difficult to understand, especially now, when many of us are having a very tough time paying the mortgage.

Having heard enough of the story, I flipped to The Today Show right at the top of the first hour and guess what the lead segment was?  

Of course the bonus payments are unconscionable, especially in these very turbulent times. But this story is little more than a distraction, or at best, a metaphor for the times in which we live. Until we are out of the woods on this crisis, we must keep our perspective, and remember these three truisms:

1. We are not in the “million-dollar business” anymore;

2. We’ve passed the “billion dollar business;”

3. We are definitely in the “trillion dollar business.”

Given the extent of our financial woes, we simply do not have time to debate the millions, or even the billions. We have a TARP package that is approaching a a trillion dollars, a stimulus package that is most of a trillion dollars, and a $3.5 trillion dollar budget submitted by the president to the congress.

If we continue to be utterly consumed by these AIG bonuses, we are going to continue to waste precious time, brainpower, and resources on a distraction. There has never been a more important time than now to remain focused like a laser on the large pools of money and make sure that they are helping to loosen credit markets, sparking spending, helping the housing market, etc. This won’t be accomplished by having the president and his cabinet sucking up all the oxygen by going on every TV show to express their dismay and show their empathy. They should have foreseen this problem and put in some caveats beforehand (this administration and the last one). Now that they haven’t, it’s time to move on.

It gets me very nervous to see President Obama, Larry Summers, and other Obama cabinet members obsessed by AIG just because the media has a one track mind. That’s like losing your keys in the living room but looking for them in the kitchen because the light is better. I would rather have them watch the trillions than the millions. That’s because once you string a few trillion dollars together you are talking real money.

The Stock Market Getting Much Needed Help (despite AIG!)

dollar-life-raftThis morning, the Dow stands at just over 7,200—about 700 points above its 6,500 point low of last Monday. The buzz this morning is all about the stupid audacity of insurance giant AIG, a company that has received some $170 billion in bailout dollars, and is now handing out a stunning $165 million in bonuses to the same execs who sunk the company. Even Fed Chairman Ben Bernanke “slams the phone” down when discussing the AIG problem, so he said last evening in a rare 60 Minutes interview. 

Last Friday I said that the last thing I want to do is write an investing blog. But the financial markets have grown in importance—and will signal the end of this frightening period of unrest and uncertainty. That’s because the stock market is always forward looking. It usually precedes an economic turnaround by some seven to eight months.

This could be an important week for the markets. Last week’s 7 percent increase  in the Dow was the best week since last November. The key question is, can we add to the gains of last week? Can we put more distance from the low of Dow 6,500? Most stock market technicians will tell you that the only way we can really rally big in the markets is to “test the lows” of  6,500 by dropping to that level again, bouncing off it, and then soaring to the heavens.

The good news, and there hasn’t been much in the last eighteen months, is that there is much being done to stabilize the markets.  Once again, I want to caution you—I am no stock market expert and do not play one in the blogosphere. But I have followed the markets for quite some time, and have never seen a market like this. However, we now have a $780 stimulus package about to go to work; the Fed has added as much of a trillion to help the situation; there is the $750 billion TARP (Troubled Asset Relief Program), and that’s just for starters. There is more money that will be aimed directly at the homeowner/foreclosure situation. Once we address the issues at the homeowner level we have the chance to reduce the inventory of homes for sale, which will be another sign that the worst is behind us.

Lastly, some of the companies in the biggest trouble are giving optimistic reports—-such as Citigroup, Bank of America, and General Motors. Fed chief Bernanke said that he would not allow any major big bank to fail, adding much needed confidence to the situation. We have some very smart people working on the economy, and we have the lessons from past bear  markets and deep recessions to help tell us what not to do.

So I look for the near-unprecedented to happen: I look for a second week of solid stock market gains. Since I am no expert or even a pundit, I can go out on a limb like that and hope that no one makes any stock market decisions based on my recommendations. The markets are against me since it has been quite some time that we have seen substantial, weekly back-to-back stock market gains.

But, like the poet Robert Frost penned it in his poem, Birches: one can do worse than be a swinger of birches.” I like standing and even swinging on limbs…even if there is a chance they are going to bend or break.

Did the Media Help Sink the Stock Market?

news-image1I am usually the last person to blame the media for anything. As a publishing type and author, I believe that the more media, the more sunlight—the better. However, I have been giving a great deal of thought to the role of the media and it’s potential effect on the economy and the financial markets. The key question is whether or not the media—whether it is the financial news channels, the cable networks, the Internet, etc.—has contributed to the present collapse in the stock market.

Before answering, let me say that I believe that the greatest culprits in our sinking economy are the fools in the housing market who altered the rules of the game (and the people who took the money), the even bigger and greedier fools in the financial institutions who bet wildly on bad commercial paper, and a weakening global economy that spanned from the U.S. to Europe to China.

But I still assert that the media has had its role in all this. That’s because while there have been several recessions in the last century, we live in unprecedented times in one relevant, important way. First, we have never had a deep recession like this one in the age of  the cable news networks. If you watch the cable networks like hundreds of thousands of people do each day, you will hear the “D” word (Depression) multiple times every day. That certainly does not help one’s psyche, especially if you have already been burned in the market. And who wants to buy a big ticket item if all you hear about is a crashing market and a Depression just around the corner. That has caused at least tens of thousands of people to buy less, invest less, and pull what’s left of their investments out of the market. That’s because the “smartest” economists of our day, Paul Krugman and Nouriel Roubini, are predicting economic calamity that could last for several more years (and even CNN has done extensive pieces featuring Roubini’s predictions). Krugman’s latest book is called Depression Economics, and Roubini is calling for a bottom in the stock market no sooner than the fall of 2009 (after a further decline in the stock market of 20 to 30 percent), and an “L-shaped recovery” that could last for years.

Who wants to put their retirement money and/or their kids’ college money to work in the financial markets under those conditions? Well, me, for one. That’s because I do believe in something that many people have abandoned, and that’s the “Efficient-Market Hypothesis,” Nobel Prize winner’s Eugene Fama’s brainchild, which holds that whatever we think we know about the financial markets is already reflected in stock prices. We will know if that is true when we get more horrendous news and the stock market rises despite all the bad news. We have seen a little of that this week with a 600 point rally in three days, but three days does not a bull market make. We still have many days and weeks and months before we will get any idea of what we are really facing. But for the record, as a long-term investor, I think we will look back on these days of Dow 6,500 – Dow 7,000 as a great time to invest. Of course, the smartest amongst us, those who know a great more than me, feel that I am prematurely optimistic. But if that’s the worst thing they could call you, then you’re probably ahead of the game.

General Electric: A Sign of the Times?

lightbulb1I have spent a good deal of my career writing and editing books on Jack Welch and GE. Unfortunately for General Electric, Welch, the so-annointed “Manager of the Century,” stepped down in 2001. There were three managers in line to succeed him, but it was Jeff Immelt who got the nod. 

Why him?

A couple reasons: Welch said that he wanted a CEO who could be there for 20 years, long enough to live with all of  the decisions he made, so he would not be tempted to make a decision that helped the company in the short run but impaired it for the long haul. That meant someone young enough to get those years in before retirement age of 65. Immelt was exactly the same age as Welch when he got the job, 44, so he was a natural.

Immelt also was an avid fan of the quality program that had become Welch’s obsession—Six Sigma. In fact, Immelt has a degree in applied statistics which also made him a natural for the position.

In 2000, The Wall Street Journalasked me to write an Op Ed on Welch’s selection of Immelt. The title of that piece, published in November of 2000, was  “Welch Successor Likely to Succeed.” In 2008, GE’s earnings exceeded $18 billion, the third highest in its history, and revenues were up by6% and global earnings by 13%. However Wall Street feared that there was too much bad commercial paper still in its GE Capital unit, and as a result, dragged the company’s stock price down to below $6 a share (for one day), something that is almost unimaginable for the last remaining stock of the original Dow stocks established a century ago.

Now Immelt has a gargantuan problem: he has a huge credibility gap with just about every constituency.  Before the stock swooned some 80% from its high, it was unthinkable that Immelt would be replaced. Now that possibility has to be back on the table for the GE board. After all, the company is in crisis. And when crisis hits, the board needs to consider every possibility, including a change at the top. And Immelt has made some big mistakes. I watched him on CNBC defending the GE stock price in the 30’s and again in the 20’s. He just bought 50,000 shares of GE stock at $8.26 per share, so at least he is now putting his money where his mouth is. Today, the stock is trading in the mid $7 range. 

It will be interesting to see what happens from here. I would hate to see the Op Ed I wrote just over eight years ago proved wrong, but on the other hand, the company has to come first. That’s because GE is a microcosm of the entire stock market. If it continues to fall, there could be some really dismal days for the entire stock market in the days ahead. However, I don’t see that happening. I think that GE and the market will bounce back. But I have been wrong many times before when it comes to the market. Let’s hope this isn’t one of those times.

How Many Books Does it Take to be a bestseller, Part II

This posting originally appeared last summer, when book sales in all cataegories were more robust. However, this, Part II of the series, gives you a good idea about what it takes to become a business bestseller:  

In the last post I highlighted the business book revolution which started in 1982. Perhaps the most remarkable thing to come out of that period was the number of business bestsellers to make the list on the same week. In the 1983-1984 business book season, there were multiple weeks in which as many as seven entries on The New York Times Non-Fiction list were business books. Iacocca, In Search of Excellence, The One Minute Manager, Megatrends, and more—all appeared the same week on the same list. In recent years, business book publishers have been lucky to get one or two titles on that list the same week. In fact, most weeks the Times has no business books on its printed list of 1-15 (there is an extended NY Times list that is not printed in the paper). 

Let’s look at the numbers to figure out why.  What follows is the #1 overall non-fiction book vs. the #1 business bestseller, followed by the 50th bestselling non-fiction book vs. the 50th best-selling business book (taken from last week’s Bookscan’s figures):   

Overall Non-Fiction                                                          Business

#1. The Last Lecture: 53,000+ sold                  #1. Strengths Finder: 8,000+ sold

#50: The Tipping Point: about 4,200 sold        #50. Secret History of Amer. Empire: < 900 sold 

source: Nielsen Bookscan

Remember there are only 15 slots on the NY Times Non-Fiction list. In this particular week, the #15 bestselling (overall) non-fiction book was a book called Eat this, not That, a book that sold almost 11,000 copies. Obviously since the #1 bestselling business book sold a little over 8,000, there is no way that a business book could capture a slot on the NY Times printed list this week (since its top selling title sold 3,000 fewer than the #15 overall, non-fiction book). 

That’s not an abberation. That’s a pattern that we see week in and week out. Also, the #1 bestselling non-fiction books typically sells 3-6 times as many as the #1 bestselling business book. Why is this? The non-fiction category contains just too much firepower for the business book category: biographies, political books, self-help—more than 40 distinct categories make up the non-fiction list and business is only one of them (albeit one of the strongest categories).                               

This begs the question: why did business books dominate the bestseller list for a brief period in the early-to-mid 1980s? There could only be one explanation. This was the beginning of an era in which business and “corporate America” swept through the country like a firestorm. We were transfixed and transformed: from an uninspiring period of sinking stock prices and multiple recessions to one in which the world of business and Wall Street captured the imaginations of those on Main Street. Suddenly, the stock market took off, business books were in, and a new class of affluent investors were created. Will history repeat itself and make business the dominant category on the NY Times non-fiction list again? It’s not likely. That’s because business is now an established, thriving category. That means it cannot suddenly one day emerge as a new and incredible area of interest, as it did in the early 1980s. But never say never.

Back to how many copies it takes for a business book to be succesful? As a very general rule of thumb, if a business book sells more than say, 20,000 – 25,000 copies its first year, that’s a strong showing, particularly if it’s someone’s first book. Of course, that doesn’t include the extremes, the Jack Welch’s and Warren Buffett’s at the high end, or the specialized niche books at the other end (say, a book on financial engineering or option trading). However, as Coach John Wooden (of UCLA)  liked to say, don’t keep watching the scoreboard. Write what you’re most passionate about, play a leading role in the book’s promotional campaign, and let the chips fall where they may. (Read this interesting article to learn about what happens to books that never come close to the bestseller list).

How many books do you have to sell to be a bestseller?


Here is a piece I ran late last year that has been requsted and read more often than just about any other piece. This is Part I of II:

One of the most common questions I get from authors is “how many books do I have to sell to be successful?” or “How many books will it take for me to make the bestseller list?” These questions are of course related, but not necessarily the same thing. And there are no real simple or pat answers to either question.

For instance, to make The New York Times Non-Fiction printed list, it isn’t how many copies you have to sell, it is how many copies you have to sell within a given period of time—vs. all the other bestsellers—in this case a single week. Every so often a book seems to come from nowhere and leaps to the #1 spot on and The New York Times.

For an extreme example of a non-business bestseller, take What Happened: Inside the Bush White House and Washington’s Culture of Deception, by Scott McClellan (PublicAffairs). That book was leaked to the press before its official publication date, sparking an unprecedented firestorm of press, and immediately became non-stop fodder for all of the cable news channels. When the book was finally released, it sold well over 20,000 copies its first week, about 100,000 copies its first month (according to Nielsen Bookscan).  Sales doubled to more than 50,000 in its third week, a phenomenon that can almost always be traced to positive word of mouth.

The ever-gushing press helped to catapult the book to #1 on the Times Non-Fiction list its first week out, knocking Barbara Walters’ kiss-and-tell-memoir (Audition, Knopf) down to #2, despite the sensational media her book garnered. (For a compelling article on bestsellerdom, please see The Guardian).    

Business books rarely have that kind of action for obvious reasons. Few business books are actually newsworthy, and certainly not to the extent of a stunning, revelatory book that comes from an insider of a sitting presidential administration. However, every so often a business book can be something of an event.

Take Jack Welch. His well-anticipated memoir, Jack: Straight from the Gut (Warner, 2001), debuted at #1 on the New York Times List regardless of the book’s unbelievably unfortunate publication date of September 11, 2001. Welch had received the second highest non-fiction advance in history (at $7.1 million, only the pope had received more. Then the Clintons beat them both, with Hillary at $8.5 million and Bill at $12 million).  Even though there had been more than fifteen books published about Jack Welch by that point, this was the first one from the man himself. Despite mostly lukewarm reviews, the book went on to sell about a million copies. That’s an impressive number but nowhere near the record number for a business memoir held by Chrysler savior Lee Iacocca’s Iacocca, which sold more than two million copies in a single year. It became the best-selling hardcover non-fiction book for two years running in 1984 and 1985. But that is a once-in-a-lifetime case (twice at most), what I call a phenomenon book.

What about the more traditional, “how-to” business book? That modern day genre was sparked, at least in part, by Peter Drucker in 1954 with the publication of The Practice of Management (Harper & Row), a book which remains, remarkably, in print to this day. He told me that before he wrote that book, he went to the library in search of anything that would help one to manage a business or corporation, “but there was nothing,” which is “why I had to make it up.” 

Fast forward to 1982 (see my post entitled The Business Book Revolution ). That was the year that started everything.  Between 1982 and 2001 publishers had no mechanism to figure out how many copies were sold by books published by compeitors. That changed with the emergence of Nielsen bookscan, a pay-service that tells publishers how many copies any book sold that week, that month, year, life-to-date, etc. That service changed the landscape by providing publishers with the first accurate data on how many copies a book sold in any particular week. In essence, it made publishing an open book test. The data comes out Wedesday mornings, and editors and publishers stay glued to their computers Wednesday morning, hoping that the latest numbers bring good tidings on their latest books (for a great article on “why writers never reveal how many copies their buddies have sold,” see Slate’s article by Dan Gross). 

Come back next posting to hear more on what it takes to be a bestseller—in Part II of  “How many books do you have to sell to be a bestseller. “

A Time for Humility and Gratitude


No one in the publishing industry doubts that we are facing a very challenging environment. There are signs of a collapsing economy everywhere you look:

* There have been layoffs at some of the world’s best publishing companies, putting some very talented people, including some very talented editors, out of work.

The financial markets have cratered, with the Dow down more than 50% since the high of 14,000+.

* The huge insurance company AIG, reports a record quarterly loss of $62 billion today. This firm has received something like $170 billion in taxpayer money. This one-time powerhouse corporation is now selling for less than 40 cents per share.

*  Borders, the nation’s second largest bookseller, is in deep financial trouble. Its shares sell for around 50 cents per share.

There are other signs of the deep recession taking its toll on the publishing industry. Booksellers are routinely taking fewer copies of virtually all books as compared to previous years. This makes the publisher’s job of sparking a book onto the bestseller list much harder, since distribution has been hampered. On the flip side, booksellers reorder very quickly once a book shows signs of real strength.

With unemployment below 10 percent, low interest rates, and a presidential administration throwing trillions at the problem, we are not in a depression, nor likely to enter one. In the 1930’s unemployment was 25 percent, a far cry from where we are now or where we are likely to go.

As we begin March, the last month of the first quarter, I know I feel great gratitude to still have a wonderful job in the best industry on the planet. One of the keys to success in an economy like this is to work harder than ever, search out new and exciting opportunities, and to have the confidence that the books we are acquiring will mean real success for us going forward. That’s my viewpoint—the perspective of someone who makes his job acquiring books for my imprint. I also feel a deep sense of humility as well, as so many talented people find themselves without jobs in this very difficult time.

As I have mentioned before, however, I am a deep optimist at heart. I know we will come out of this stronger than before. Whenever we face a challenging environment, I cannot help but think of the business leader who predicted the end of books and the rise of the microcomputer. That happened in 1982, and this particular executive predicted the death of books in five years. Five years later, books sales were stronger than ever, and the only thing that disappeared was the executive who prematurely predicted the death of the book. For those in the industry without jobs take heart: the pendulum will swing back the other way and firms will begin to hire again. This has been the pattern ever since there have been books (with the possible exception of the 15th century, when monks made the majority of books but found themselves unemployed by the year 1500. Another great story taught to me by Peter Drucker).

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