If there's one thing Wall Street knows how to do, it's take an issue of minor irritation and turn it into an uncontrollable, national disaster through the alchemy of arrogance, hubris, and too much money.
That's how your annoying bank fees blossomed into Occupy Wall Street, how the London Whale grew from a misguided trade at JP Morgan into a reportedly $7 billion loss, and how the securitization of mortgages turned into a global subprime crisis. When challenged by opposing forces, Wall Street just won't listen. The Street has favored the Mad Men model of largely swilling martinis and hoping for the good old days to return.
It's blind, yes. But it's not unusual. If it only it were just Wall Street that was being so blind.
The events of this weekend show that Wall Street doesn't have the monopoly on the first rule of holes (that is, "when you find yourself in one, stop digging.")
It's instructive to look at NBC's response to criticism of its Olympics coverage to see why not just Wall Street, but much of Corporate America, has a serious problem of corporate culture. If you're not a cubicle slave, you might be more familiar with the common name for corporate culture: "attitude."
If you're not familiar with the problem over at NBC, it's easy to catch up. The network is not providing any live TV coverage of the Olympics, which generated livid commentary on social media this weekend. The network is hoping to corral U.S. watchers into sitting in front of their TVs for five hours every night until the Games end. As The Atlantic intelligently pointed out, there are 64 countries that have live Olympics coverage and the United States isn't one of them.
It's an irritation, certainly. But somehow NBC has mismanaged the situation so badly that even Wall Street would ask if this were completely necessary.
In the latest development, NBC has shut down one prominent journalist's Twitter account. Many on Twitter have already spoken of the rich irony that the network of media, the owner of NBC News, MSNBC and CNBC is trying to muzzle the press.
So, using some lessons from Wall Street, let's look at how NBC turned a bad situation into a worse one.
1. Don't sell an inferior product and expect no backlash.
One common bond among Wall Street's worst scandals was putting personal profit ahead of wise decision-making and client service. Goldman Sachs, for instance, agreeably packaged toxic mortgage securities for one good customer, John Paulson, and sold them to unwitting rubes overseas who were barely aware of the implications. While that benefited one client -- Paulson -- it got Goldman into a heap of regulatory trouble and earned the distrust of other clients. Or look at Merrill Lynch's traders who sold complicated derivatives they knew to be bad investments, because it would help their bonuses.
NBC, similarly, is providing no live Olympics coverage, because the network wants to earn a lot on its $1.1 billion investment in the games. One look at, say, the BBC's extensive Olympics coverage shows that NBC is providing fewer viewing choices - and the ones it does provide only work fitfully.
2. When public opinion turns against you, listen closely if you value your job.
Wall Street got bailed out in 2008, and then briskly went about its heavily subsidized business afterward, ignoring public complaints about the industry's greed and sloppiness. The result? The rising tide of anti-Wall Street sentiment forced boards of directors to oust their leaders. Several Wall Street CEOs lost their jobs, including Stan O'Neal at Merrill Lynch, John Thain at Bank of America Merrill Lynch, Ken Lewis at Bank of America and Charles Prince at Citigroup. The remainder of Wall Street still didn't get the hint. Enter Occupy Wall Street, a movement that coalesced anti-bank sentiment nationally.
Similarly, NBC has approached the complaints about its coverage with condescension and haughtiness. The network explained that it could not broadcast the Opening Ceremonies because viewers would require "context" that only the network could provide (including, presumably, the incorrect fact that Luxembourg is located in central Europe). Later, when viewers groused that they could not watch live events, NBC patiently explained that its goal was to get everyone in front of a TV, no matter what viewers themselves might have wanted.
It is a mistake to ignore the signs of public dissatisfaction, especially if the job of a TV network is to deliver the public to advertisers.
3. Hubris kills your reputation fast.
Jamie Dimon was the darling of Wall Street, Good King Jamie, because he knew how to read a room and openly criticized the arrogance of other bankers. But when Dimon's own bank made a misstep, he dismissed it as a "tempest in a teapot" and expressed his support of the firm's traders and leadership to make smart decisions on their own. Soon, a small loss became a $2 billion one, and that teapot has reportedly turned into a $7 billion cauldron. Dimon has had to eat those words many times over since.
NBC, similarly, has refused to accept any criticism of its non-live Olympics strategy, even pointing to "record ratings" of its Olympics coverage as proof that it's on the right track. But the network is ignoring several important factors. The first is that the ratings would naturally be strong on the first weekend of the Olympics, when interest is high and people aren't at work. The second is that the network's ratings are high in select markets -- like Salt Lake City and San Diego - but not in major markets like New York and Los Angeles, which advertisers pay the most to reach. The third is that ratings are hardly a vindication of smarts if you have a monopoly. NBC has no competition for the Olympics broadcast; high ratings are only a sign that people are interested in the Olympics, not necessarily NBC's way of delivering the Olympics. Most Americans would not care what channel the Olympics were on. They would watch the Games on NBC, ABC, CBS, Fox or PBS.
Those three factors should be important checks on corporate hubris. Instead, NBC has ignored the signs and dismisses anyone who complains as part of some radical minority fringe. Even Jamie Dimon wishes he had listened to the warnings of the press when he had a chance.
4. Embrace innovation.
Sure, Wall Street loves to talk about "financial innovation," by which it means "complicated derivatives." But Wall Street didn't embrace true innovation during the crisis - for instance, using sophisticated computer systems to actually check credit scores, income claims and other factors in mortgages. The inevitable result- a wave of defaults that eventually took down the financial system - was nearly inevitable.
Similarly, NBC believes it is embracing the future by creating livestreams of its Olympics coverage and iPad apps. But those are not innovations; that's just keeping up with technology. True innovation might be embracing the Internet and alternative forms of paying for content, like iTunes, Hulu and even NBC itself have done. (NBC had a clever Tour de France subscription package with all the features viewers want in the Olympics: live video, with the ability to fast-forward, slow-mo, and switch between events.)
5. Don't create martyrs.
Shutting down critics is a sure sign that a company is on a collision course with disaster. When Enron executives cursed out a critical analyst on a conference call, the loss of cool ended up being an indication that the company had a lot to hide. Similarly, when then-little-known analyst Meredith Whitney challenged Citigroup executives on their insistence the bank would dispense with a dividend, they belittled her. But her criticism was correct. The result: Citigroup lost its chief executive and Whitney became a folk hero. And when derivatives helped nearly blow up the financial system, all eyes turned to one woman: Brooksley Born. As the former chair of the Commodity Futures Trading Commission, she warned that derivatives would be an enormous danger to the financial system. She was shouted down by Larry Summers, among others. When the crisis played out just as Born predicted, she was an instant folk hero in books, articles and many other records of the financial meltdown.
Similarly, NBC took extraordinary action against an outspoken critic -- Guy Adams of The Independent -- by lobbying Twitter to shut down the Twitter account he was using to complain -- and urge others to complain -- about the network. Within hours, Adams was a cause celebre of journalists who created a #SaveGuyAdams hashtag on Twitter. He also became the subject of articles on Bloomberg and The New York Times, as well as the homepage of the Drudge Report, providing NBC with more bad press. The momentary satisfaction, for NBC, of snuffing out a rival will probably be a karmic backlash against the network for using the techniques of an oppressive regime.
Will NBC change its tune and learn from Wall Street's arrogance how to avoid a public backlash? So far, the peacock seems determined to ruffle more feathers.
“I think the best compliment I can give is not to say how much your programs have taught me (a ton), but how much Marketplace has motivated me to go out and teach myself.” – Michael in Arlington, VABEFORE YOU GO