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Business as Theatre

Last week I spent two evenings at rather different spectator events – the first listening to Robin Klein at London Business School and the second watching David Hare’s new play about the economic crisis The Power of Yes at the National Theatre.  I have to say that I much preferred the former to the latter, not just because of the difference in ticket price I assure you! The play wasn’t the best I’ve seen – more of a Panorama-style documentary to explain to the man in the street what’s been going on.  Amusing to see actors portray Ronald Cohen, John Moulton, Adair Turner and others.  In fact the latter was sitting two rows in front of me and wore an expression of smiling relief having come out of it without criticism.  To my eye the audience was full of retired folk who probably came to see why they’d lost their pensions.  Wise then to steer clear of the stories about Madoff and Stanford and focus instead on what was wrong with the mainstream financial sector  – apparently awful people like Adam Applegarth and Fred Goodwin.  “Ronald Cohen” told us that on a scale between ‘interested in people’ and ‘interested in business’ Fred scored 100% at the latter end.

The stand-out lesson was about human nature – we are mainly influenced by our own recent past.  A long bull run and nobody remembers what went before indeed nobody remembers to even question what’s going on.  Is it enough for the banks to say ‘we had to do it because everyone else was’.  George Soros was quoted relating his own emigrant past to his personal expectation of discontinuous change.

Robin’s talk described his journey from buying into a tiny engineering business, relocating to the UK, a tense brush with a leveraged buyout, elevation to Corporate Executive and finally to a position where he was able to capitalise on the rise of the internet in consumer-facing businesses.  Now of course an investor in many early stage startups.  Some parallels with Soros’s formative years.  For me one section of the Q&A served to underline that setting up a venture capital fund staffed by analysts and deal-doers who lack mainstream commercial experience is more or less hopeless.  I am sure that’s one reason why performance in this asset class has been so poor.   Robin presented many learning points; David Hare sadly too few.

Addendum

Review now available:

Guardian

Independent

The Stage

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Banks for entrepreneurs – no more Mr Nice Guy?

There’s a steady flow of chatter amongst the business owners I meet about the behaviour of the major banks towards their SME clients.  Maybe this is going to lead to much better buying by the entrepreneurs and much fiercer competition between banks.  Here’s why this could happen…. but first please take the poll if you’re a business owner.

I have heard plenty of reports about the bank manager who says ‘off the record we’ve all been told not to….’ followed by phrases such as ‘…lend anything’, ‘…renew overdrafts’ etc.  In other words whatever discretion used to be available to the lending manager has been pulled.  The blanket policies cited – if real – seem pretty dumb too, often affecting growing businesses who have yet to feel recession hitting their finances.  One such story even got the banks mentioned on Twitter!  There has been positive PR in reaction of course – the banks occasionally quote lending statistics that would have you believe the complaints are in a minority.  Time will tell what the real picture  has been but I wonder how this episode might change the relationship people have with their business banks? 

For years it has been said that people overpay their banks because they don’t shop around and change to take advantage of the choices that exist.  Some people don’t realise what better terms they can get whilst others think switching is too difficult (it’s much much easier than you think).  The last recession was the one when the banks realised how unprofessional their internal systems were, allowing for example overdrafts to be used as permanent finance.  This recession they are up to speed and putting the screws on customers but maybe they don’t yet realise what the consequences could be.  Perhaps now business owners will say ‘no more Mr Nice Guy’ because they feel that is exactly what the banks are saying to them.  Someone once said ‘there’s more to a banking relationship than time’ and this is coming true for so many businesses – just when they really need their bank relationship of ten years standing to show some understanding they get a slap in the face.  Relationship? Fact is they always found a reason to put off a visit from their ‘relationship manager’ and anyway the bank doesn’t take it seriously either. 

Personally I think changing the bank-business deal would be an excellent development.  One freshly laid-off banker I know is offering his services to businesses as an independent advisor on how to get the best banking deals – I would really like to see him succeed and help lots of business owners improve their profits by keeping the banks honest!

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