The Limits of Charisma: The “Sequestration is Dumb” Edition (a.k.a How on God’s Green Earth Did we Get Here)?
Having written about some of the greatest leaders of the 20th century, I have always believed that charisma and leadership have little to do with each other. That idea is hardly new. It has been espoused most eloquently by the late, great Peter Drucker (the “Father of Modern Management”) when I met with him in 2003—as well as in several of his classic books.
Drucker also asserted that charisma, as defined by Merriam Webster as ”a special magnetic charm or appeal,” could also be used as a construct to explain the evil influence of some of the worst leaders of the 20th century, like Stalin or Hitler. But, for the sake of this piece, we will use “charisma” to describe a positive leadership trait.
Before moving on, let’s get back to Drucker for a moment. To underscore the difference between leadership and charisma, he wrote: “Harry Truman had no more charisma than a dead mackerel,” but accomplished great feats of leadership and legislative victories nonetheless. In contrast, Drucker asserted, “John F. Kennedy was perhaps the most charismatic president of his day, but “few presidents got less done.” I take exception with that characterization, since Kennedy both inspired a generation, and saved the world from a potential nuclear exchange during the Cuban Missile Crisis.
Let’s fast forward more than five decades to today’s occupant of the Oval Office. In ways that were similar to JFK, Barack Obama has the gift of oration and charisma, two qualities that helped to get him elected twice. Obama is a gifted and intelligent president. His command of the bully pulpit typifies at least part of what makes a great leader, but only a part. For leaders of states and nations, there is no substitute for authentic leadership and effective legislating. Consider them as two sides of a coin. Opponents of Obama have labeled him the “campaigner in chief,” because whenever a difficult choice must be made by him and the congress, he takes his argument directly to the people, passing “go,” both houses of Congress, and the media in one fell swoop. But presidents must do much more than campaign.
The most effective leaders don’t just talk, they act. They articulate a path forward—a vision of the finish line—and get others to follow; this is true for people they don’t like or who hold different views than themselves…especially those that think differently from themselves. That was the best part of Lincoln—the President (as well as the movie). It is in this regard that Obama has consistently let us down, especially when it comes to the economy. Even though his common sense ideas are almost always more popular than any that emanate in Congress, he still comes up short when it comes to getting others in Congress to follow his lead. Recently Obama has reached out to members of congress by hosting a lunch and a dinner with key members of congress (but not the leaders of either house of congress).
Of course, John Boehner and the other House Republican’s obstructionists (e.g. think Tea Party zealots) have actually made congress less popular than cockroaches (I kid you not). Their responsibility in sinking the U.S. economy into the sequester quagmire is equal—and even greater—than President Obama’s. Most Americans blame Republicans for hurling us into this mess which according to the government, could easily spark the loss of 750,000 jobs just when the United States was getting on solid ground following the great recession of 2008/2009. One very recent Bloomberg headline summed it up as follows: Congress Budget Cuts Damage U.S. Economy Without Aiding Outlook
POISONING THE WELL
And in one way important way, Republicans spoiled the well in a way that Obama will never forget.
Several years back, on the floor of the Senate, Leader Mitch McConnell announced that his main priority was to “make sure that Obama never gets a second term.” That is unprecedented—and politics at its worst. One would think that creating legislation that leads to a stronger economy and the ending of two wars would rank higher than ridding the White House of its current occupant—or any sitting president for that matter. Think of it. What if one of your colleagues at work said the same thing to the entire company you work for—that getting you fired is his main priority. There is no way that would be tolerated by the leader of that organization. But the 2013 Republican party is both a leaderless and rudderless party. That did not happen overnight. They had to work at it to be so out of touch with the American mainstream.
I view Obama, who boasts a more definitive swagger after his second term win, as a determined prize fighter landing blow after blow on the entire Republican party. Don’t misunderstand me. He did not want this sequester to go into effect, but, as many pundits pointed out, he “miscalculated” by overplaying his hand. He thought that the Republicans would cave again because they could not tolerate the cuts to the Defense Department. Clearly he was wrong. And there are more “cliff-like” moments coming at the end of March and in the ensuing months that follow.
In the early days of March, no one knows what effect the Sequester will have on the economy and the financial markets. That’s because this is an unprecedented event for the U.S. (a self-inflicted $850 billion wound). People in far-away lands are incredulous—they can’t believe that the greatest country on Earth cannot get their fiscal house in order. In light of that, who knows what they will think of us if we are unable to come up with a new budget in the next few months. Stay tuned!!
Greece, Spain…Who’s Next? Wenzhou or Wisconsin?
We certainly do live in interesting times, especially if you are like me—a stock market junkie who also follows world events with equal measures of interest and cynicism. Before I continue, I should point out that I started writing this blog a month ago, but I could have just as easily written it three or four months ago. That’s how long these major market headwinds have been around–and most much longer (e.g. Greece). Given how fast things move in the financial markets, and more importantly in the world at large, the enduring nature of our most pressing problems is worth noting.
This is a piece about the stock market, and how long the U.S.—and most other global markets—have behaved in such an insular, illogical fashion for so long. It is as if the outside world did not exist, which is what has traders so frustrated for so long—and why I have agonized over this market for months. In fact, I have hated this market since June.
Why?
Like so many other investors and money managers, I have been awaiting some financial disaster—a “Black Swan” event or a “Lehman moment”—that would simply crush U.S. markets. That’s why I have been largely short the market since June, with Facebook at the top of my short list (and Apple a close second since before the troubled iPhone 5 release. But I closed that winning position quite recently). In other words I made a major bet that the markets would fall since early summer, and that just didn’t happen. However, with terrible earnings thus far in Q3, all of that looks like it might finally change—and change fast. Either way, until quite recently, the last months have been nothing short of stock market torture.
I am not alone in calling this “the most hated market rally of all time.” Many money managers have not participated in this market “melt-up.” Research reveals that in 2012 well over 90 percent of portfolio managers have failed to keep pace with the returns of the S&P 500 (which is up 15% through three quarters, its best performance in years). That means that there are literally tens of thousands of traders and money managers who were judging the market on macro events, and as a result, like me, were under-invested. But when the central bankers—first Mario Draghi in Europe and then Ben Bernanke in the U.S.—promised to do “whatever it takes” to prop up respective economies, that artificially propped up most global markets by more than ten percent since late July. I say artificially because that sort of open-ended monetary policy seldom leads to the kind of authentic growth that can lift economies for the long-run, and not just financial markets for the short-term.
The reasons for my continued market pessimism should surprise no one. There is the horror-zone that is Europe with negative-growth countries needing to be bailed out by at least one other country in which its citizens don’t want any part of any additional bailouts (hint: they invented the blitzkrieg). Then there is the much talked-about “fiscal cliff,” which reveals the absolute inanity of the U.S. government. It is a travesty that they cannot get a thing done. Give congress a lamp and a light bulb, and you will still be sitting in the dark a month later. Congress won’t budge an inch on the “fiscal cliff” with its automatic spending cuts and expiration of the Bush tax cuts. The GOP won’t risk making Obama look competent a few short weeks before the election. As a result, businesses are frozen in place. Since they don’t know what the tax situation will be next year, they are loathe to hire new workers, which only adds to uncertainty—and markets detest uncertainty.
Then there is the China slow-down, which is a huge factor sparking another huge problem: the slowing of growth in the U.S., as evidenced by a multi-year high of corporations missing their top line numbers (in the current quarter only four of ten companies have made their top line revenue targets thus far—despite the fact that these numbers have already taken a haircut or two. That’s down by more than 30 percent from an average earnings report). Also, China gives us reports year-over-year without any quarterly adjustments, which obscures the meaning of their numbers even more.
You can stop reading here, or get more detail on the key headwinds described above. If you are still with me, let’s get back to Europe.
Most of Europe is in either recession or depression or heading in that direction—with things getting worse with each passing week (although many talking heads on financial networks will talk of declining Spanish bond yields as evidence of an improving economy. Spoiler alert: they’re wrong). The most beleaguered country—Greece—is experiencing a full-blown depression. With overall unemployment rates of 25%, and a jaw-dropping 55% for young people of working age, Greece is sadly an unmitigated disaster in which things will get worse before they get better. European leaders are finally learning that austerity measures are the enemy of growth, a lesson they should have learned long ago (but are still not changing their stance much on austerity measures). Instead of an accurate representation of the state of these broken economies, what we usually get are platitudes on “progress being made” and “more time should be given” [to Greece]. It appears that Europe’s politicians will say most anything to kick the can down the road to preserve the euro—and the 17-country euro zone—for as long as possible. However, that can only work for a a finite amount of time as the truth of Greece’s inability to pay off their debilitating debts become apparent to everyone [Citigroup puts the chances of a Greek exit from the euro zone at 60%, down from 90% a month earlier].
However, Greece is not lonely at the bottom, nor is it Europe’s most severe problem.
That honor goes to Spain, Europe’s 4th largest economy. This proud nation is in crisis. They accepted $100 billion euros to bail out their banks, but that was just to prop up failing financial institutions. The rest of the country is mired in a double-dip recession, and the country needs to be capitalized or risk running out of money. Unlike Greece, Spain cannot be swept under the euro zone rug for months to come. The country is too big, and its problems much bigger; yet their leader, Prime Minister Mariano Rajoy, stubbornly refuses to request a bailout for the country. And in the “new” Europe, a country must officially request a bailout, and all the growth-killing austerity measures that goes with it—to get any funds from the European Central Bank. But who can blame Rajoy? Every other leader who received bailouts have been voted out of office. It does not help that Rajoy is a serial procrastinator, and is not likely to request a bailout anytime soon, despite weekly press reports to the contrary. He may simply follow Europe’s lead and kick that same can down a different road—a road that leads to additional pain, more debilitating austerity, and ultimate insolvency.
Next up—China. According to numbers coming out of that country, growth is slowing quickly, with growth expected to come in at about 7%-8% for all of 2012. That would be amazing for the U.S. or Europe, but not for China (the U.S.is growing at a rate between one and two percent). In many ways, China poses a far more vexing problem than Europe. Another important aspect of the China problem is that their numbers are likely a canard. China is of course not a democracy, which makes any numbers emanating from that country suspect. That’s why, for example, anchors on CNBC use things like Chinese electricity consumption numbers as a more accurate guide to measure Chinese economic growth. I believe that when the real numbers are finally revealed in 2013, it is far more likely that China had grown by perhaps by four to six percentage points in 2012. We know that dozens of countries in the U.S. have missed their top line revenue targets in the second and third quarters because of slowing growth in China and the euro zone, but more CEO’s have pointed to China as the biggest problem, especially technology companies. This is true with the best U.S. tech names like IBM and Intel. Some large company CEO’s have said that China “feels” like it is growing at two to three percent rather than the seven or eight percent sworn to by China. There is also a monumental change in leadership coming soon in China, which only adds to anxiety in a way that the fiscal cliff has added to fear and anxiety in the U.S.
One city in China—Wenzhou—gives a more accurate picture about what is really going on inside world’s second largest economy. Quite recently the Washington Post ran an article entitled: “Some see China’s in Debt-Ridden City of Wenzhou.” The article made the point that the debt issues of this city bears some resemblance to the Bear Stearns of 2008, which was the first shoe to drop in the debilitating liquidity debt crisis of 2008-2009. The piece also mentioned that a prominent professor from Beijing saw Wenzhou as a “signal that high-interest private lending might trigger a debt crisis.” China’s total debt is estimated to be somewhere from 10 trillion to 14 trillion renminbi (about $1.6 trillion to $2.2 trillion). That pales in comparison to the U.S. with more than $16.1 trillion debt, which comes out $51,472 per American citizen. Hence the title of this posting.
If we are not far more prudent with our fiscal and monetary policy going forward, is it possible that the U.S. becomes the next Spain? It is surely possible, especially since congress is such a dysfunctional organ of our government. Since the stock market is forward looking, I would expect the market to be weak (meaning down) over the next few weeks as uncertainty rules the day. We will know more after the U.S. elections and the ringing in of the new year. Until then, consider buying some protection for your portfolio (e.g. buy some SPXU which is the inverse of the S&P 500), stay tuned and fasten your seat belts.
How Low Can Facebook Go? Look to Business Books to Tell the Tale
This trusim is something I alluded to in my last blog posting, and for me, this is a fascinating reality: “If it isn’t a book, it isn’t a stock.” Having just celebrated my 30-year anniversary in the business book industry, I certainly have seen my share of “phenomena” books. Electronic day trading was a phenomenon in 1998 before dying a quick death by late 2001. In the early 1980s, in the wake of the stunning success of In Search of Excellence, every publisher and their mother brought a book out with excellence in the title. That worked for a few weeks before that market died.
Unlike a hot topic like electronic day trading, most social media books have been spectacular failures from the start. I don’t even need the Nielsen Bookscan numbers to know that, for I know intuitively that this genre of business book would die on the vine. How did I know? Because social media books are the classic case of publishers barking up the wrong tree. Publishers have an incredible penchant of publishing the hell out of the wrong topic at the wrong time. Sure, a few social media books did well, but they are the exception, not the rule. While social media is still growing by double-digits in developing nations across the globe, few top tier publishers are bringing out any new books on this topic. Why? Because people who are active on Facebook and Twitter spend hours on these platforms—and no time reading books on the topic. They don’t have to. They know how to access and use these sites so why do they need a book telling them how important it is or how it will influence their lives or society as a whole?
There is also great competition entering the Facebook space: for example, Pinterest, the “online billboard,” is quickly emerging as the next big thing in social media.
This brings us back to the stock market. As I have mentioned before, I have been short Facebook (that is, betting it to go down) since the end of May. I have always believed that there is a dearth of leadership at the $60 billion company, especially in the chief executive’s office. I knew that if publishers could not make a go of social media books, then the biggest company on the block would have a hard time making it as a publicly traded company. The problem isn’t that the customers aren’t there. With nearly a billion users, they have the eyeballs that would make 99 percent of companies salivate. The problem is that they haven’t found a way to monetize their hundreds of millions of users. And when sales can’t keep up with users you have a problem. And when the entire industry is shifting to mobile, a much smaller platform for advertisements, you have an even bigger problem. While I think there is a good chance Facebook will figure it out eventually, it will require time and a kings ransom to get it right. While the firm has money, they don’t have much time. In late 2012 there are far fewer investors out there and more traders than ever. Fewer and fewer people are buying and holding stocks. That means that companies have less time than ever to right the ship. If Facebook can’t get mobile revenues into the multi-billions by say, Q1 2013, I could see the stock sinking into the high single-digits. Single digits? That’s impossible right? Ask Zynga, a firm that, at the time of this writing is trading at $3 per share after hitting a high of just under $16 per share in April of 2012. Or the discount coupon company Groupon (another company I am shorting), which is down almost 80 percent since it went public last November.
The truth is that no one knows what will happen to Facebook stock. But one thing is for sure: as a book category, social media books are likely to go the way of Friendster and MySpace.
Betting Against JP Morgan’s Jamie Dimon
Sunday, July 22nd, 2012: We certainly live in interesting times. Especially if you follow the stock market as closely as I do. I have loved the market since I was 13, and that is a very long time. In all of those years, I have never witnessed a time in which seen so many factors could move the market as I see now. There is everything from the fall of Europe, the weakening of China to the very real possibility that the U.S. will actually fall off the “fiscal cliff.” (That is, the raising of taxes for hundreds of millions of Americans come December 31st unless Congress and the president acts—and how often does Congress actually “act” in a way that helps financial markets?).
In this new tumultuous environment, things can—and do—change very quickly. For example, news came this morning that the IMF (International Monetary Fund) has made the decision to discontinue payments to Greece. While the cable news channels have not picked up on this story at all, this could be a huge event that leads to Greece leaving the Eurozone. No one knows exactly how that will play out, but the chances are that it would be a huge mess as Euros get converted to Drachmas, the value of which would have to be determined. Greece is already in a “depression,” says the newly elected Prime Minister Antonis Samaras (and Spain, Europe’s fourth largest economy, is following in the footsteps of Greece. We know this because their bond yields have risen to the “insolvent” level of 7.2 percent, meaning no one will lend them money).
All of this turmoil has turned me into a different type of investor in two key ways. One, I am now more trader than investor. No more “buy and hold.” Now its buy and watch closely. Also, for the first time, I now short stocks. That is, I bet on certain stocks to go down. Which stocks am I shorting? The first stock I shorted was Facebook. That’s because I live by a rule that lies at the intersection of my work life and investing life: “if it isn’t a book, it isn’t a stock.” What does that mean? Although social media is huge and getting even more popular, people tend NOT to buy books on the topic. They don’t need to. They know how to “friend” someone on Facebook or send a tweet without a book. Sure, a couple of social media books did well, but 90 percent of them were dead on arrival. When Facebook’s IPO came out, I went short on the stock about a week later and have held that position ever since.
But the more interesting stock I shorted next was JP Morgan Chase with its “fortress” balance sheet (that’s how CEO Jamie Dimon characterized his company). After the huge “London Whale” loss was announced a couple of months back, I shorted the stock because of the “cockroach” theory. What’s that? If you see one cockroach in the kitchen you know there has to be more (meaning JP Morgan has more problems than the one bad trade). However, I didn’t stop at JP Morgan. Because of the recession sweeping across Europe (and on to our shores next, I predict), I shorted most of the big banks including Bank of America, Morgan Stanley, Citigroup, and Credit Suisse. I figured that the banks would be hit the hardest if the bottom fell out of our economy. I have only added to those positions since.
But it is important to put things in perspective. Perhaps 75% of our savings are in stocks (in long positions), bonds and cash. Only a quarter of the whole are in short positions, and even in that account I am long my favorite stock, which are eBay and Pfizer (among others). I think of my short portfolio as a hedge against an “end-of-the-world” scenario.
But back to JP Morgan Chase. Last Friday it was announced that CEO Jamie Dimon and his wife purchased 500,000 shares of JP Morgan stock on Thursday and Friday. That means that I was adding to my short position while the executive—who supposedly knows the company better than anyone on the planet—was betting the other way. I was shorting 1,200 shares while he was buying 500,000 (talk about David versus Goliath). However, not only am I not deterred I plan to increase my short position today. Why? Well, for a few reasons. I can’t help but recall the time that Jeff Immelt, CEO of General Electric, went on TV telling investors that someday they will look back and see how lucky they were to purchase GE stock at $30-something per share. Since then—and one huge financial crisis in 2008—the stock traded at $5 and change. Today GE trades at $19 and change. That means CEOs are not as infallible as we would be led to believe. In fact, the opposite could be true. Dimon is a very smart CEO (as evidenced by his expert testimony in front of both houses of Congress). However, he is not exactly objective about his firm. Besides, macro events like Europe will move his stock and there is nothing he can do about it.
Only time will tell who was right. For the record, as a long term investment I agree with Dimon. His company will do well; that is, as long as an investor has a 3-5 year time horizon. But in the short term? I didn’t even mention the Libor investigation hanging over most of the banks. That’s too inside baseball and this blog posting has gone on long enough.
Facebook, Mark Zuckerberg & The Search for the Next Jack Welch
Leadership is one of the most popular of business book categories and a personal favorite topic of mine. Over the years I wrote and edited close to a dozen books on Jack Welch, the near-legendary former leader of General Electric (the company founded by Thomas Edison more than a century ago). I also edited chapters and books on other visionaries like Michael Dell, Sam Walton, Herb Kelleher and Andy Grove, but whenever I hear the word “leader” I can’t help but think of Welch. Since Facebook went public in May, I have been struck by the contrast of the two men, and the 50-year difference in their ages is the least of it. Welch was ever-present, crafting a new vision for the firm, empowering others to execute on it, and launching company-wide initiatives (such as six sigma and globalization) that made the company more efficient and more competitive. But before I go too far with this example, let me say it is grossly unfair to Mr. Zuckerberg. First, Welch was not, well…Welch for a long time. Before he became CEO he was known as a brash, outspoken leader, a 40-something maverick so unlike the seven previous GE CEOs that he nearly did not get the top job.
The far more common comparison made in the press is between Mark Zuckerberg and the late Apple co-founder and CEO Steve Jobs. That’s a more fitting comparison since both were young innovators with grand visions, and both helped to shape technology revolutions (Jobs the computer revolution, and Zuckerberg the social media explosion). A footnote here: I find it interesting to discover that Jobs told his biographer that he truly admired Zuckerberg for doing the hard work of creating a great company, and not selling out earlier. However, the comparison between Zuckerberg and Jobs is also not fair to Mr. Zuckerberg. That’s because, like Welch, Steve Jobs was not Steve Jobs until a more mature version of himself returned to Apple for his second stint in 1997. It was only then that a more capable and charismatic Steve Jobs came up with incredible new innovations like the iPhone and iPad.
With Leadership Comes Responsibility
Maybe it isn’t fair to compare a 28-year old Mark Zuckerberg to iconic figures like Jack Welch and Steve Jobs. But I contend it is fair…and not just fair, but imperative, to assess the young CEO’s performance on what a leader is supposed to do. After all, it was his decision to maintain 57% of the voting stock, thus ensuring his tight rein over the company. What happens to Facebook is his responsibility. However, in the company’s third week as a publicly traded company, Mark Zuckerberg is nowhere to be seen. Following a headline-making fiasco of an IPO, Mr. Zuckerberg got married and went on a honeymoon to Europe. I am all for love and marriage, but the company lost an eye-popping 30 percent of its value in its first two weeks and shareholders—or anyone in the financial press—has not heard a word from Zuckerberg since the firm went public. That seems at best irresponsible, and at worst criminal (not literally, but from a leadership perspective). In addition to all of the people that call him boss, he now has millions of stockholders that own a piece of his company and has to answer to them. With each passing day that we don’t hear from Mr. Zuckerberg, investors grow increasingly impatient and frustrated (full disclosure, I am not a stockholder and in fact I am presently shorting the stock).
So what should we expect from a CEO from a Fortune 500 company?
Here, Welch’s rules of business provide much insight. First and foremost, a leader of any sized firm must face reality. The reality at Facebook, at least from a capital markets perspective, is that Rome is burning and there appears to be no one at at home with even the smallest of garden hose. Next, an effective CEO creates a vision and gets others to make that vision a reality. According to press reports, Zuckerberg has said that his vision is to bring people together. That’s a very laudable mission, but does nothing to monetize the 900+ million users of the site (which is made all the more difficult when more than half of its users access the site via mobile apps). In fact, the Facebook founder has specifically mentioned that profit is not his goal. While that is not necessarily a bad thing—many great CEOs take care of customers first and let the profits follow—he didn’t need to emphasize the point. After all, the company is now a publicly traded firm, and as important, many millions of his customers are now his stockholders. What few are talking about is how the stock price has soured so many of Facebook’s customers on the company. I wouldn’t be surprised to hear of millions of users who have lost real money on the company and are swearing off the site for good.
Time will tell if Mark Zuckerberg has the stuff that true leaders are made of. He has time, but not that much time. Now that he has relocated his company to Wall Street he is learning that he now resides in a very unforgiving neighborhood. In the next couple of months the stock will report earnings. With growth slowing and no fresh, big ideas on how to bring in new sources of revenue, that might be a very tough learning day for the young CEO. Maybe Mr. Zuckerberg should consider bringing in an outside CEO to run the company. Other great founders have followed that strategy and it has worked more often than not. But that is also no silver bullet. Social media tends to be a young person’s game. The Zuckerbergs of the world have grown up on the Internet. An outsider, and an older leader, is unlikely to have the same perspective as Zuckerberg. It would take the right person with just the right blend of youth and experience to excel at the job. But all of that speculation is probaby a futile exercise. Zuckerberg shows no sign that he is ready to relinquish the CEO role to someone else. So for the foreseeable future, the company’s fortunes will rise and fall on the shoulders of its founder.
What Business Book Publishers Look For in an Author
If you are involved in the business world, you know that things have gotten a lot tougher in recent years. The housing crisis, which persists to this day, along with the great recession that began in late 2008, have conspired against the business book world in a big way. In today’s challenging economy, sans Border’s, it is harder than ever to get a business book published. Many authors, particularly first time authors, ask me this key question: what do publishers look for in a business book author? Here are some answers, not necessarily in the correct order. Publishers look for:
* Super smart authors with great and original ideas
* Authors that have a great on line presence. This could mean an email list of say, 100,000 names, or a very big following on Twitter, Facebook, and other social media
* Authors with a superb Website and blog with tens of thousands of users
* Authors that give dozens and dozens of speeches per year, or host a similar number of seminars
* Authors whose last book was an unmitigated success (and conversely, publishers avoid failed authors—that is—authors whose last book has failed)
You get the idea. When you get right down to it, publishers look for authors that have the ability to sell thousands of copies of their own book. That’s because the author platform, which is determined by the answers to the aforementioned questions, often means the difference between success and failure for a book project.
Some authors then ask the next logical question: if I am going to do all of the marketing and selling, what do I need a publisher for? That’s a fair question. Publishers actually bring a great deal to the table, but of course, not all publishers are created equal (I will save that thought for another blog posting). But in the meantime, consider this: a good publisher can lend great prestige to a book, helping you to build your brand in a way that would be impossible any other way. A good publisher will also help you to develop and shape your manuscript, and come up with the right package for your book (e.g. title, cover, subtitle, chapter titles, subheads within chapters, etc.). They also do much to market and distribute your book to brick and mortar bookstores as well as online resellers like Amazon. This is true in the U.S. and around the globe. With the most popular business books, they pay for special bookstore placement in airports stores and other national chains (e.g. table placement for your book with Barnes and Noble). They also have publicists on staff that attempt to get as many mentions for your book in the print and other media, as well as book reviews, and when appropriate, radio and television interviews. Lastly, their rights departments attempt to sell your book to as many international publishers as possible, which often means additional streams of income (this is especially true with management and leadership books, as well as books on global topics).
So to sum up: publishers look for authors with great platforms that can sell tons of books. In return, however, publishers bring their considerable resources to bear to maximize your book’s potential. It is fair to say that publishing is a two-way street: however, the traffic on the road has never been more treacherous.
Permit me to add a postscript to this piece: if it occurred to you that I spent little time discussing the quality of the content of your book idea, you are not alone. After writing this posting I was struck by the fact that there was only one mention of the actual book idea. The truth is that many business publishers examine an author’s platform before closely reviewing the content of the manuscript. I think it is a sad commentary on how the business book industry has evolved. But it is also reality. It doesn’t make me love what I do any less, it just means that I have grown to be a bit more cynical than I would have hoped.
Literary Agents Level the Playing Field
As many of you know, I have had the good fortune to be in the publishing world for almost exactly 30 years. And not only in the publishing world, but in the business book part of the publishing world. For 27 of those 30 years I have worked with such great publishing houses as McGraw-Hill, Dow Jones-Irwin, and Portfolio/Penguin. And wrote or published works on such business luminaries as Jack Welch, Lou Gerstner, Ross Perot, George Soros and Warren Buffett, to name a few. That is, until 2009 when I decided that I would become my own boss and create a unique business: a literary agency that offers agenting services as well as writing and editing services. I figured that two factors would set my business apart from the typical literary agency:
1. All I do is business books, making me a true specialist of the industry; and
2. I offer all sorts of writing and editing services, helping authors develop whatever they need to distinguish themselves and their work(s) in the marketplace.
Oh, one more thing: I also specialize in working with first time authors. I have a respect and love for the business book world which is why I enjoy educating those special group of budding authors about to tackle their first book project.
I often get the question, “do I really need a business book agent?” And my answer is always the same. You may not need one, but you definitely want one. Why do you want a business book agent? There are several key reasons:
1. An agent with a sterling reputation can help bestow a whole other layer of credibility to your project. Some of the best publishers won’t even look at a business book proposal unless it comes from a reputable agent. By hooking up with the right agent, your book takes on added and not insignificant authority.
2. A literary agent can help ensure that you are putting together the right materials that publishers require in order to make a positive publishing decision. This includes the business book proposal, which is a specialty of my firm;
3. An agent, especially one that does nothing but business books, has all the key contacts in the industry to ensure that your work will end up in the hands of the right editors and publishers. I have hired or worked with as many as half of the key business book editors in the field at one time or another;
4. An agent will get you a better deal than you can get for yourself. This one may be the most obvious. An agent knows what to look for and ask for—things that you might not even think of. Negotiating is not only a strength of mine it is an absolute passion. You might find this hard to believe, but there is nothing in life that I don’t negotiate. Hell, I even negotiate the number of toys for my sons’ Happy Meals at McDonalds!
5. A good agent sees the big picture. In recent months I have worked with authors who have the potential to write several books. I advise them on which book comes first, and helps them to map out a five-year strategy for their entire writing career. Put another way, I see beyond the dollar signs of a single book and instead see the forest through the trees. My entire future is dependent on authors who can write multiple books that succeed against long odds.
There is much more that I can offer an author but I will leave that to a future blog posting. If you think you may need my services then email me at jkliterary@comcast.net or call me directly at (630) 323-5499. Feel free to contact me 7 days a week as I seldom take time off. I look forward to hearing from you soon.
Ghostwriter Needed?
I have learned that there are many great potential authors who can use some help on the writing side. I found this is especially true in the business book category. Great business minds are usually so focused on their passion (e.g. investing, leading) that writing may not be at the top of their skill set. In fact, some of the best business folks I know often need help when facing the blank page. They have a great idea but they might not know how to get it down on paper. I also understand that time is one of their scarcest resources, and I am able to get ideas on paper using the least amount of the author’s time.
I worked in business publishing for almost 30 years and some of the best books I’ve read during that time were scribed with the help of a ghostwriter. The key thing to keep in mind is that there is nothing wrong with that. I have been hired to work as a ghostwriter by several top notch business types who knew that writing was not their strongest suit, and if you are thinking about writing a book in the business category, I would like to work with you.
To get in touch with me and discuss your writing needs, feel free to email me at: jkliterary@comcast.net. If you are the busiest of business people, you will be glad that you did.
Literary Business Off to a Great Start
It has been too long since you last heard from me but that’s only because my writing and agenting business has been going so well. I have been working like a dog in my one-year-old-plus company, and I am delighted to report that things could not be much better. That’s because I have had the good fortune to work with some of the greatest people I have ever worked with—including the great authors I have worked with in my 27 years in corporate America.
I take great pride in the work I have done with co-host of the new hit CNBC show Strategy Session—Gary Kaminsky. Gary has emerged as one of CNBC’ s brightest new stars, a sagacious and singular figure that knows more about the financial markets than most anyone I know. He is a rare client that has become a good friend, and my agency owes him a huge debt of gratitude. That’s because my business is a referral business, and Gary has sent other CNBC colleagues my way and I have benefited greatly from these important relationships.
In fact, I am now working with one of the other ingenious market experts and CNBC personalities—the Chief Market Strategist of Virtus Investment Partners—Joe Terranova. If the name sounds familiar it should—Joe is one of the stars of the highly successful CNBC show, Fast Money. It took me almost two years of prodding to convince Joe to write a book; he is simply too modest and didn’t think the time was right for a book until now. His book has garnered great interest from the publishing world and will be published by one of the great business publishers next year.
That’s about it for now. I must get back to work if I am going to make my deadlines!! I will be checking in far more often so please be sure to check my blog every so often.
A New Business Model and a New Bestseller?
Every so often a literary agent gets the chance to represent a book that is so unique in every way that it is a privilege to represent. Last week I was given the opportunity to handle such a property. However, I must confess, that I did not immediately “get” the book, largely because it breaks most every rule of business book publishing. First a bit of history.
Two European authors—Alexander Osterwalder and Yves Pigneur—spent years putting together a stunning book on business models entitled BUSINESS MODEL GENERATION. The two authors had a great deal of help with the design and content of the book, as it was co-authored by 470 Business Model Canvas practitioners from 45 countries, which in itself is highly unusual for any book, business or otherwise. The authors self-published two versions of the book, starting with a gorgeous 4-color hardbound version that lays flat when you set it down on a desk or table.
Some weeks ago I was contacted by author Alex Osterwalder asking if I would represent him and the book (I was referred to him by one of my other authors). My first reaction was to refuse taking on the book. After all, even though the author self-published 5,000 copies of the book and sold them all through his website (businessmodelgeneration.com) , there was no “official” record of those sales so I knew that publishers would be quite skeptical of the book. And that was only one roadblock. There were also several other obstacles the book faced that would make selling it to a top notch publisher an uphill battle:
* The authors were not based in the U.S., which often complicates matters
* The book has a “clunky,” awkward title (Business Model Generation does not roll smoothly off the tongue)
* The book has a very high price tag of $46.99, more than double the average price of a bestselling business book—and in an impossible economy to boot
So I did not take on the book. Then, some weeks after the authors sold out their 5,000 copies, they reprinted 10,000 copies of the book. Now here is where things get really interesting. On February 3rd, 2010 the authors managed to get a third party seller to sell the book on Amazon. Finally, the authors would get some help in selling the book beyond their own websites (the other site is businessmodelalchemist.com). But once again, there were obstacles that made it very difficult to sell the book on Amazon:
* It’s not even Amazon selling the book on Amazon, but a third party vendor
* It is very difficult to even figure out the price of the book on (see the Amazon page for the book)
* There is absolutely no discount offered for the book (usually Amazon discounts books by 40 percent)
* The Amazon page is so bleak, it makes the book appear as if it is out of stock
One would think that all of those obstacles would derail the book, but a funny thing happened to the book on the way to the bestseller list. The minute the book became available on Amazon, buyers came out of the woodwork to purchase the book. Within 48 hours the book ranked as high as #74 on Amazon, an amazing feat for most any business book and especially this one. Since then, the two versions of the book have occupied two of the top 25 slots on Amazon’s list of bestselling management books every single day. This kind of success is so rare that I would classify this book as a “phenomenon” book, one that beats huge odds to become a bestseller (and this is before any publisher has entered the picture). This time I did not repeat my mistake and happily agreed to take on the project.
Last week I contacted a handful of my favorite editors/publishers and this time I was not surprised when every publisher I notified expressed interest in the book. Given the success of the self-published versions it was hardly surprising that interest among publishers would run high. By this time next week we should have found a great home for the book, with a publisher that sees the book for what it is: an exceptional product that is helping to build a community of people who appreciate all of the blood, sweat and tears that make this a one-in-a-million book and opportunity.
- The Limits of Charisma: The “Sequestration is Dumb” Edition (a.k.a How on God’s Green Earth Did we Get Here)?
- Greece, Spain…Who’s Next? Wenzhou or Wisconsin?
- How Low Can Facebook Go? Look to Business Books to Tell the Tale
- Betting Against JP Morgan’s Jamie Dimon
- BEST BUY: “Amazon’s Showroom?” Not so Fast.
- Facebook, Mark Zuckerberg & The Search for the Next Jack Welch
- What Business Book Publishers Look For in an Author
- What Business Book Publishing and the Stock Market Have in Common
- Literary Agents Level the Playing Field
- Ghostwriter Needed?
-
Categories
-
About Jeffrey
-
As former Vice President and Publisher of McGraw-Hill's trade business books division, Jeffrey Krames has personally edited and published more than 275 business books, including many award-winning, best-selling titles on business luminaries that include Jack Welch, Michael Ovitz, Ross Perot, William Paley, Michael Dell, Bill Gates, Herb Kelleher and Lou Gerstner among others. Read more...
-
Archives
- March 2013
- October 2012
- July 2012
- June 2012
- April 2012
- August 2011
- September 2010
- August 2010
- February 2010
- January 2010
- December 2009
- November 2009
- October 2009
- September 2009
- August 2009
- July 2009
- June 2009
- May 2009
- April 2009
- March 2009
- February 2009
- January 2009
- December 2008
- November 2008
- October 2008
- September 2008
- August 2008
- July 2008
- June 2008
- May 2008
Recent blog posts
Stand Out!
Click here to check out
a model book proposal.
-
Find It
-
Sign up!
-
The Unforced Error
Sneak Peek - Chapter One!
Source Notes
