All That Glitters...

Here’s a cliché for you — perception is reality.

It’s a cliché that needs to be understood, and maybe feared, by every businessperson, politician, celebrity — every person — who seeks in any way to engage the public.

But here’s the thing about clichés: they lose their sting, they cease to impress, they become just so much background noise.

So let’s try coining new descriptors — non-clichéd versions of the same stark truth: Perception has consequences. Reality can break you.

Or maybe a real-time case study will be convincing enough. So please bear witness to the bruising of Goldman Sachs, and see what lessons you might draw — and what lessons GS is refusing to draw — about the power of perception.

What’s vital to understand is that, as of this moment, it’s nearly irrelevant whether GS brokers were truly snickering and calling their clients “muppets” while conspiring to wring every last dime from them. And it doesn’t much matter whether GS was an architect of the housing crisis, a sinister, greedy manipulator, or whether they were just along for the ride like the rest of us.

The truth of these things doesn’t really matter because the perception about them has already gelled. It’s solidified into reality.

Goldman Sachs never put much work into image rehabilitation, even as they were pilloried by Congress and paid out half a billion to settle a SEC fraud suit. They’ve remained wildly profitable so they evidently didn’t see the need. But this stance left them ill-prepared for the late-breaking revelations from Greg Smith, who resigned from the company quite publicly and railed in a New York Times op-ed about a culture of corruption and duplicity.

Goldman Sachs can deny and refute, but that’s irrelevant too. Their new reality has already arrived. They lost three-and-a-half percent of their market value in a little under two days.  

Or if you need a more direct, cliché-free accounting of the cost of perception: about $2.2 billion and rising.

The C4:

1. Goldman Sachs stands accused of profiteering at the expense of their clients and of society at large. A former London-based employee named Greg Smith recently started a firestorm by publicly indicting the company’s culture.
2. Goldman Sachs has weathered economic challenges well, remaining consistently profitable throughout the financial downturn.
3. The company has shown little awareness, maybe even less concern, about their worsening public image.
4. Perception is reality, and a poor public image erases market share. Always has, always will.

Is Lehman's off the ropes?

Will the Wall Street cornerstone climb back in the ring?

Looking back, the financial collapse of 2008 seemed to move like a glacier: slowly, inexorably, unstoppably. But in the midst of that slow-mo meltdown, a few memorable events struck with tectonic suddenness, altering forever our financial landscape and leaving us to wonder if there could ever be a recovery from such unprecedented economic shock.

The worst, by far, had to be the September 2008 collapse of Lehman Brothers, a 161-year-old cornerstone of Wall Street investment banking. Like so many bank failures of the time, this one was fueled by twin mistakes: an over-investment in mortgage-backed securities, and an inadequate supply of capital to cover the bets that were destined to go sour. The only unique part of Lehman’s story was the scale: they went down holding nearly $1 trillion in debt, resulting in the largest bankruptcy in U.S. history.

Knowing that, what do you say when Lehman’s emerges from Chapter 11 a mere three and a half years later? “Miraculous,” is what the bankruptcy judge said, and he’s right.

Despite its bankruptcy, Lehman’s was always flush with assets. Their real-estate holdings include some of the world’s most profitable hotels and office space. They’ve got tens of billions in private-equity investments and corporate bonds. They even own a sizable stake of Formula One Racing.

The management of Lehman Brothers has spent the last three years creating a liquidation plan, to turn those assets into a payday for Lehman creditors. The first checks are scheduled to go out in April, and are expected to total about $65 billion, or 17 cents on the dollar.

Not a great return, but certainly better than nothing, and probably much better than most creditors expected. 

So which part is miraculous — that Lehman’s has emerged from bankruptcy, or that they seem to be doing all they can to make things right? Either way it’s a sight to behold, and it’s nice to believe in miracles again.

The C4:

1. Lehman Brothers filed for Chapter 11 bankruptcy on September 15, 2008. It was the largest bankruptcy in U.S. history and one of the defining events of the Great Recession. 
2. Lehman’s is unwinding over $600 billion worth of debt by liquidating approximately $65 billion in assets.
3. After just three and a half years in bankruptcy, Lehman’s is emerging in March 2012 and beginning to repay creditors in April.
4. A concerted effort to do what’s right goes a long way toward fixing past mistakes.

The Wild Wild Net

Will SOPA circle the drain as privacy succumbs to piracy?

You’d expect a little less anarchy from something originally funded by the government and built by the military.

But anarchic is exactly what the Internet has become. It’s been that way for a long time, in fact; ever since it metaphorically broke free from the government lab and spread across the world.

Not that there haven’t been efforts to rein it back in. The most recent attempts to tame the wild, wild net were SOPA (Stop Online Piracy Act — the House of Representatives’ proposed legislation to fight Web-based copyright infringement) and PIPA (Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act, or PROTECT IP Act — the Senate’s version of the same bill).

You probably remember the howls of dismay that reverberated across the digital landscape after these bills were introduced late last year. Protests culminated with the January 18 blackout of Wikipedia, Reddit and an estimated 7,000 other websites.

Critics argue that the bills’ definitions of “piracy” are so broad they would effectively spell an end to news aggregation sites and just about all user-content hosting services (which means no more YouTube and a serious hobbling of Facebook).

The backlash forced SOPA and PIPA to be tabled in committee — not abandoned, exactly, but at least set aside, probably until after the election.

All of which leaves mixed emotions. On one hand, the wild and woolly nature of the World Wide Web has been an awesome adventure in unfettered free enterprise.

On the other hand, online criminality is rampant. Intellectual property is filched like dime store candy. Predators are everywhere. Naive and vulnerable netizens, the very young and very old, get victimized in unspeakable ways.

If SOPA and PIPA aren’t the answer, then what is? Are we addicted to anarchy, or do we grow weary of the lawlessness? 

One thing’s sure: our virtual world is built solely of electrons and consensus. How it’s governed, if it’s governed — that’ll be by consensus, too.

The C4:

1. SOPA and PIPA are controversial for their broad definitions of copyright infringement. These bills are currently dormant, but are by no means dead.
2. The Web we have today came about by what we — all its users — opted to create. We’ve collectively built history’s most powerful tool for communication and commerce.
3. We’ve also built a criminal’s paradise. Some of its victims are our most vulnerable citizens.
4. What’s to be done about that? It’s up to all of us to decide.