I was pleasantly surprised and gratified to see the U.S. Securities and Exchange Commission sue the State of New Jersey for fraudulently misrepresenting its financial health because of its failure to report on the status of its pension funding.  According to the SEC, New Jersey had 79 separate bond offerings between 2001 and 2007, representing over $20 billion in tax-exempt bonds, on which it made false and misleading disclosures to investors and prospective investors.

I would hope this is a first step to getting government finances in order.  Like many people with discretionary assets, my wife and I own tax- exempt bonds.  We are deeply concerned about whether we are getting accurate and complete information about the state of finances in Connecticut, and in the few other states in which we have government bonds.

According to an editorial in the Friday, August 20, 2010, Wall Street Journal, entitled “The SEC’s Jersey Score” Congressman Barney Frank believes that the credit-rating agencies should apply different standards to government securities issuers because they rarely default.  He is wrong.  They do default, and California defaulted last year by paying in IOU’s instead of cash for a period of time.  During the Great Depression, many units of government were essentially insolvent.

The issue is much bigger than whether states and localities pay their bondholders on time.  They are cutting back vital services to their citizens and punitively raising taxes and user fees and reducing their base of employees in clumsy and dysfunctional ways to meet their payment obligations.  They are essentially becoming nothing more than conduits for payments from all the citizens to a much smaller group of militant, well-organized state and local employees and retirees who are receiving excessive benefits.

This is not an income transfer from the rich to the poor, but from all the citizens, rich, middle class, and poor, to a small group of citizens who are taking a greater share of the citizens’ wealth than is justified by the type and duration of services they perform for the state and its citizens.  The reason this income transfer system has arisen and persists is because it is the path of least resistance for government officials.  More state and local employees, particularly as union members, means more votes and more campaign contributions, and a greater chance of being re-elected.

Only time will tell whether this lawsuit is an aberration or whether it scares risk-averse public officials into doing the right things in terms of disclosing the true story regarding the financial health of the governmental entities they lead.

I was going to post another blog today until I saw the Van Jones Op-Ed piece in the Sunday, July 25, New York Times entitled “Shirley Sherrod and Me.” Not only do I agree with his conclusion that the Obama Administration decision to fire Ms. Sherrod was wrong and destructive, but it might have been one of the most harmful actions the Obama Administration has taken on any issue.

Government officials have become more risk-averse over time, and less effective as a result, precisely because, in varying degrees, they are judged by different standards from private sector employees.  Over a decade ago, I had dinner with an executive who had been fired by the U.S. Postal Service, after he had worked in the private sector for a good part of his career.

His observation about being a government executive was that the highest risk situations for a government employee were either unwanted media scrutiny, the threat of a government investigation, or the threat of a Congressional hearing.  There was another long-term Postal Service executive who was fired a few years later because of a relocation package he received, which received excessive media scrutiny, even though it had been approved by the Postal Service’s Office of the General Counsel, its chief ethics officer, and the Inspector General.  One thing I learned about the Postal Service is that, after a 1992 scandal involving vendor-related events at the Barcelona Olympics, it operated at the highest ethical standards.  The firing was unfortunate, but the Postal Service apparently felt that it had to eliminate even the appearance of ethical problems.

The trouble with the Sherrod firing, as well as other incidents like it, is that as Mr. Jones put it most eloquently:

“Life inside the Beltway has become a combination of speed chess and Mortal Kombat: one wrong move can mean political death. In the era of YouTube, Twitter and 24-hour cable news, nobody is safe. Even the lowliest staff member knows that an errant comment could wind up online, making her name synonymous with scandal.

The result is that people at all levels of government are becoming overly cautious, unwilling to venture new opinions or even live regular lives for fear of seeing even the most innocuous comment or photograph used against them, all while trying to protect and improve the country.”

Not only is he right, but, unfortunately, the Sherrod incident will be remembered for a long time, and will affect behaviors all over all levels of government.  Government officials and employees will attempt to figure out not only whether what they said or did could get them into trouble, but whether someone could misinterpret and distort words or actions to hurt them.  They will refrain from doing or saying something, rather than doing something that needed to be done.

I had that experience a few times while I served as CEO.  It was unnerving.  People literally heard something different from what I said, and, on two occasions, an otherwise competent and well-meaning attorney told me that the company could get into trouble not only for what I said, but for what people incorrectly thought I said.

Having people live in perpetual fear is a bad way to run government, business, a non-profit organization, or any other grouping of people.  It is a bad way to force people to live their lives.  The notion that people should be held accountable for distortions that other people might create or project on to a situation is dangerous.

The Obama Administration has to realize that it did severe and probably irreparable damage to the effectiveness of government at all levels, and needs to pull back from knee-jerk behaviors based on appearing to defend the highest standards of ethics and race relations.  It actually achieved the opposite effect: individuals will be scared to talk constructively about race issues in situations in which a dialogue could help race relations.  Moreover, the impact will be felt in a wide range of other situations and on a wide range of other issues.

The President should take the step of framing how he thinks about the level of initiative he wants from government employees, and have a concrete set of actions, which he should announce in a prime time nationally televised address.  He should then follow through on his commitments, and make it clear to government employees that a misinterpretation and distortion by someone else will never again subject an employee to disciplinary action.

I may come across as an alarmist, but I really think this situation has far more serious consequences than might first meet the eye.

This past week, I was on vacation, first at Martha’s Vineyard and then in Mashpee on Cape Cod.  I have an I-Phone, which means that I have ATT cellular phone service, as was the case with my wife, my sister-in-law and brother-in-law, whom we visited on Martha’s Vineyard, and many of their other visitors.  Additionally, I rented a home that had all cordless phones.  The owners, whom we met Saturday morning, July 10, before leaving had Sprint cellular phones.

The telephone and Internet service were so bad for the eight days we were away that we were effectively cut off from communicating with others except for very brief periods when we could find a signal at a handful of locations.  Moreover, when there were power outages because of weather and horrific heat, we also were unable to use the landline phones in the rented house or the wired Internet service the owners had provided us.

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I am continually amazed by how experts who make excuses for why certain problems have remain unsolved overlook simpler and less expensive solutions to these problems.  For example, a whole population of advocates have pointed out that low-income people living in inner cities, particularly those lacking access to an automobile, are trapped in what are now called “food deserts,” that is, areas in which people lack access to affordable healthy food. Very often, the food deserts have abundant access to less-healthy junk foods, cigarettes, alcohol, and, of course, illegal drugs.

The usual solutions are to put supermarkets in the inner city, or to have farmers markets in the inner city or urban gardens in abandoned lots.  While all of these solutions are excellent long-term answers, all have problems or limitations.

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I was prepared to post another blog recently, but decided that it was important to post some observations about John Wooden, the great basketball coach of UCLA who died on June 4 at age 99.  Like most people passionate about sports at all levels, I admired John Wooden as a coach, a teacher, and a leader.

Wooden won the NCAA championship with a very small, fast team in 1964 and 1965, with two dominant centers, Kareem Abdul-Jabbar (then called Lew Alcindor) and Bill Walton, between 1967 and 1973, and with a team of physically strong forwards and guards in 1970 and 1975.  He made his team the center of attention rather than himself.

What were his secrets?  Every successful college coach has to be a great recruiter, a great team builder, a great teacher, and a great game coach.  However, what struck me most about Wooden was a quote about him in the June 14, 2010, issue of Sports Illustrated, in an article by Alexander Wolff entitled “Remembering the Wizard, ” as well as a quote on a sign he posted on his office wall.

The quote about him was “His great strength was a knack for knowing when and what to change, and when to leave things be. He let sands shift, but only over bedrock.”  The quote on his office wall was “It’s what you learn after you know it all that counts.”  The combination of these two statements is the essence of a great human being: someone who continuously learns and tests his or her ideas, and, through continuous learning, discovers what changes, as well as what is unchangeable.

The stakes for continuous learning have been raised by the scientific research summarized by David Shenk in his book The Genius in All of Us. The research to which Shenk refers us makes it increasingly clear that what we thought were genetically-determined traits in ourselves and our children and grandchildren may very well be changeable, based on our behaviors and attitudes. Shenk’s point is that, by our actions to learn, grow, and become healthier, we can alter the genetically-expressed traits in future generations, especially for future offspring or for children still under our environmental control.

In this stage of my life, I have transformed myself from a secure corporate executive to a person who is engaged in a number of entrepreneurial pursuits.  Although my life is at a more frantic pace than ever before, I feel more energized and healthier than ever.  I am making mistakes left and right in my new pursuits, which include investments in health care companies, charity service providers, a reality TV incubator, and even two full-length feature films, one of which is fully produced and is Fog Warning, and the other of which is at the pre-production stage through a newly-formed production company called Gyre Entertainment.

The words describing John Wooden ring true to me because virtually every transformational success that occurred in my life happened because I broke the rules and followed a path different from those who seemed to have mastered conventional paths to success that were no longer working predictably.  I am particularly finding that today in the film industry.  No one in their right mind would say that anyone in the film industry has a working formula for success.  Most films fail, andmost investors never get their money back.

The most successful film industry people with whom I have spoken are respected because they have a less poor record than others, and, perhaps, had a single blockbuster hit or a single Academy Award nomination that validates them.  There is an old (and, as expressed, politically incorrect) statement that “In the land of the blind, the one-eyed person is king.” However, I aspire to be consistently successful, not to get a hit 1 in 10 times, so I know that I need to use a radically different approach to making and distributing a movie.  Similarly, the person who is successful 10% of the time is a failure in my book.

The movie industry reminds me of the direct mail business, in which direct mailers celebrate a 1% response rate as an exceptional success in an industry in which the average response rate is .25%. To me, a 1% response rate is an abysmal failure. It means that 99% of the people threw the mail into the wastebasket without responding.

What do these two industries have in common and how is John Wooden’s wisdom relevant to both?  What they have in common are a lot of relatively successful and wealthy people who depart from Wooden’s maxim that it’s what you learn after you think you know it all that matters.  These industries are dominated by people who stop learning after they “know it all” because they achieve a certain level of success.

I am not wired that way.  I strive to succeed all of the time, although I know that is impossible, simply because I know that striving for continuous success means that I will approach a problem radically different from the mainstream people in an industry.  I also know that many of them will ridicule me, and tell me that what I am trying to do will not succeed.  Their deep skepticism often is grounded less in logic or facts, but in a deep-seated need to believe that their approach is unassailable, even if it fail 90% of the time (as it does in entertainment) or 99.75% (as it does in direct mail).

How do we distinguish between what must change and what is foundational, something John Wooden understood in the context of basketball coaching and educating?  First, anyone who tells me that they have a consistent playbook or formula for success that has worked for several decades is automatically suspect.  Similarly, anyone who tells me that all the rules that have governed the past no longer apply is also suspect.  The current and future environments will always be a mix of the new and the time-tested.

Second, I am immediately suspicious of someone who tells me that a product or service that depends for its success on the stupidity and irrationality of the public is also suspect.  As Abraham Lincoln once said: “You can fool some of the people some of the time, all of the people some of the time, and some of the people all of the time, but you can’t fool all of the people all of the time.”

Third, I get suspicious of anyone who tells me success is totally random or totally formulaic and predictable.  Fourth, I get suspicious of anyone unreceptive to my ideas because I am new to a field. Someone who judges me based on my track record rather than the strength of my ideas will undervalue what I am saying or proposing. Finally, I value entrepreneurs or thinkers who continually test out their thinking and adapt, based on what they learn. Transformative thinkers are highly secure people who are not scared to admit they might have been wrong.

John Wooden has left this earth, but, fortunately, his example and his teaching will stay with us and be available to inspire and teach us forever.

In the Friday, May 21, 2010, issue of The New York Times, there was a front-page story by reporters Mary Williams Walsh and Amy Schoenfeld entitled “Padded Pensions Add to New York Fiscal Woes.” The reporters highlighted the fact that many financially strapped New York State cities are saddled with pension costs far in excess of what their financial experts estimated when the pension plan provisions were put into place.

Unfortunately, this is an all-too-familiar story: a governmental entity that irresponsibly agreed to rich pension benefits to allow government workers to retire very young, receive an exceptionally high percentage of their pay, and have taxpayers feel the financial burden decades later.  However, the example provided relative to Yonkers, New York, is especially outrageous.

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The narrow purpose of this blog is to respond to Congressman Murphy’s comments, but the broader purpose is to give my perspective on the recently enacted health insurance reform legislation, so this blog will be very long.

Preliminary Comments

There were many good things in the legislation, including an enhanced focus on prevention, on health care quality, on expanding the reach and supply of community health centers, on tackling the challenges of long-term care, on correcting issues associated with senior citizen prescription drug coverage, and on experimenting with innovative and potentially transformational payment methods.  There was much to like about it, and I will devote my life to working with what has been enacted to make it achieve the goals of transformational and improved health care.

I empathize with lawmakers like Congressman Murphy who do not get presented with perfect, simple choices, especially on an issue like this, which is so contentious.  They have to make choices based on imperfect options.  He, like many of his colleagues, is trying to do the right thing, and has an exceptionally difficult job, and does it extremely well.

I took a few extra days to read this legislation, which was not easy to do, and his comments made me think much more carefully about my views, so I thank him on behalf of all of us.

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Not surprisingly, since this is the first anniversary of President Obama’s inauguration, and the special U.S. Senate election in Massachusetts has produced a result that seemed inconceivable six weeks ago, a Republican victory, many people have asked my opinion of President Obama’s performance.

I met the President four different times before he was elected, three of those times at National Urban League events. President Obama struck me as a person with virtually unlimited growth potential and tremendous intelligence and character, and I still believe he has those qualities.

At the same time, I remind myself that he had no executive experience of any significance before he secured his first executive job, being President of the United States.  I expected him to make some rookie mistakes because of his inexperience as a chief executive, and he has.

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Although I usually post a blog on a public policy issue, this end-of-the-year blog will be a combination of personal, public policy, and business observations. The one thing I can say with certainty is that 2009 evolved in a very different way from what I expected when I stepped down from the Executive Chairman position at Pitney Bowes a year ago.

The only thing that happened as I anticipated was that I would disengage emotionally from Pitney Bowes very rapidly, because that is who I am.  Once I leave an organization, I leave with fond memories, great friendships, and insights of lifelong value, but I leave the organizational responsibilities completely behind.  I am not a person who is nostalgic about what I once had or did, and this was no exception.  Other than that, everything that happened was either a surprise or a disappointment.

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In the Monday, November 23, Wall Street Journal , reporter Melinda Beck recounts a number of our successes in improving public health in an article entitled “20 Advances to be Thankful For.” Among the advances she highlights are:

• The fact that we had the same number of traffic fatalities in 2008 as we had in 1961, which is remarkable considering the significant increase in the driving population, the number of cars on the road, and the number of miles driven;
• The 50% decline in trans fats in packaged foods since 2006;
• The fact that 71% of our population lives under either a state or local ban on smoking in workplaces and/or restaurants and bars; and
• The fact that the percentage of secondary school that no longer sell soda, candy, or high-fat snacks have each risen to 64%.

I zeroed in on this article for two reasons:

• It reminds us that we are doing many things well as a society, even though the media often choose to focus on things that are going wrong.
• More importantly, there are multiple success stories from which we can learn how to improve overall population health.  Government intervention was a factor in every one of these cases, but it was not the only factor.  There were many forces, including private sector advocacy groups, that influenced human behavior for the better.

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