LEADERSHIP IN BUSINESS

Wall Street or Main Street?
Looking at Business in a Whole New Way

Timothy Stagich, Ph.D.

An economy built upon high risk and a preoccupation with wealth and investment over the need for building productivity is an economy teetering on the brink of disaster. In the United States today we have remained consumed by the desire to make the fast money on Wall Street instead of focusing our attention on improving the productivity of our businesses and building organizations through greater performance, consumer service and collaborative leadership (See Transforming Business). Our leaders have chosen Wall Street over Main Street even though it has been stated by most economists that nearly 70 percent of our economy is consumer-driven. And, even the best argument that increased wealth creates jobs is false as most of the profits on Wall Street go into the pockets of investors and profiteers and not into producing anything but more greed and wealth for those who need it least. And, most of the big money is invested by them in the high risk derivative market, which is now twice the size of the Stock Market. These are the same people who measure productivity by the desperate efforts of cost cutting and lay-offs in order to retain profitability. And, they think they are doing more with less until reality sets in and productivity declines because they refuse to put enough of their profits back into the business. Trickle down economics failed in every way because of the tendency for profiteers to build wealth and reinvest as little as possible into the organizations and businesses of America. This means instead of feeding the greed on Wall Street our government leaders should be finding ways to improve the productivity of our businesses and creating more jobs for our working class citizens on Main Street. We need to change our focus from Wall Street to Main Street.

Creating more and better jobs on Main Street through improved performance and greater productivity will not only boost the economy it will stabilize it in a way that benefits everyone in the long term. In the U.S. the profits of businesses are used primarily for the payment of large bonuses for top management and to pay off investors. In other countries of the world such as Japan most of the profits of companies are put back into the businesses to build quality and greater productivity. These profits are also shared more with all employees and not just the top executives. Only in the United States is there such a preoccupation with fast money, outrageous bonuses and high risk investment. It has evolved now to the point that it is not only threatening the stability of the economy. It has undermined our most important democratic values that have protected free enterprise in the past from the domination of companies “too big to fail” and from the financial excesses of the high risk CDS (Credit Default Swap) and the shadow banking system that brought the world economy to the brink of economic catastrophe. We must begin to rebuild our economic system in a way that supports our democratic values, jobs, the productivity of our businesses and our free enterprise system.

After the catastrophe and near collapse of the economy because of a derivative market and the CDS System that was built upon high risk and the sub-prime mortgage scam of our financial institutions, it is now necessary to take a new look at how business is conducted throughout the country and the world. This includes the need to consider a complete new set of regulations that are necessary to prevent the same disaster from occurring again. Replacing the high risk CDS (Credit Default Swap) with the CDO (Collateralized Debt Obligation) may lower risk but is not enough to refocus our attention on building organizations and productivity. And, as Peter Cohan has stated, Wall Street absorbs too much of our bright young talent that could be used to solve more important problems. Beyond new regulations it is necessary to develop both a new system of oversight and a completely new focus on productivity over profits. We need to refocus our attention on the Economy of Main Street and diminish our preoccupation with Wall Street. It is essential that we begin to look at business in a whole new way.

Profits are important but if they are not put back into businesses and if only some employees are rewarded for business success, there is a high risk that self-interest will feed the greed and all business will continue to decline. We need to find new ways to take the great profits of Wall Street and put them into building our organizations and rewarding the performance of employees who are actually creating the products or providing services for something more than just wealth. For every dollar of profit on Wall Street a dollar should be invested in building productive organizations and rewarding the hard work of our citizens on Main Street whose sweat has helped to build America over the years.

From the early days of mass production on assembly lines and in our factories, our immigrant laborers worked hard to find a place for themselves and build our nation. These are the people that are still the foundation of American enterprise who actually produce things of quality and share them with the world. We need to refocus our attention on this kind of productivity once again as this is what is necessary to build an economy that is not put at risk by profiteers and investors. These individuals bleed our economy and drain our young talent who could be using their abilities in far more productive ways. And, they work for no one’s interest but their own as they create new scams and more manipulative ways of making money at the expense of our economy and working class citizens. And, we need our young people to be more motivated by the service to others.

We can and must do better if we are to maintain our place in the world economy for something more than paper shuffling and the high risk profiteering on Wall Street. We can once again build better cars and start to provide health care for our citizens as most other countries do. And, we can make other products of the highest quality instead of becoming only a profit center for insurance and investment companies. In the past, we have been proud of our large culture of hard working middle class citizens. We can reinvest in them once again as we look to Main Street to find our answers. We are already over a Trillion Dollars in debt to the Chinese and we are running our government with record deficits that will have to be paid at some point. And, the Chinese will not accept a pay-off in the form of AIG or some other Insurance or financial Company owned by the government and the few remaining tax payers.

We need to refocus our attention on Main Street as we reinvest in productivity, the American worker and our free enterprise system, and to begin to use our young people and talented minds for something more important to the future of our country than profiteering. If we fail to refocus our attention on rebuilding our organizations and productivity, our middle class will soon disappear and only the very rich and the poor will be left. And, then who will be paying the debt when the Chinese and the Arab Sheiks come calling?

Discussion Questions

Why is America’s preoccupation with Wall Street and profiteering hurting productivity and our ability to build organizations and a better economy?
With 70 percent of the economy being consumer-driven why is so much time and effort used to help Wall Street with very little assistance to Main Street?
Why has trickle down economics failed and how can we find ways to invest in the American worker, better organizations and our free enterprise system?
How are jobs connected to greater productivity and why has wealth creation failed to create more jobs and better, more productive organizations?
How have fast money on Wall Street, outrageous bonuses and high risk investments undermined our economy?
Discuss how the CDS (Credit Default Swap), the derivative market and the sub-prime mortgage scam brought the world economy to the brink of catastrophe.
What do we need to do to begin to look at business in a whole new way? What do we need to focus our attention on and how will it help rebuild the economy?
What is the CDO (Collateralized Debt Obligation) and how will it help to lower risk on Wall Street? What new regulations are needed to prevent another disaster?
Why are so many of our bright young people attracted to Wall Street jobs when there are so many better ways to help society?
Discuss the benefits of refocusing our attention on Main Street and improving productivity, job creation and new ways of building organizations and businesses.