A New Icon Is Already Up In The Air

American takes off. Again.

Before & After

There’s much more to the art of branding than symbolism and iconography. But then, without the symbols and icons, there is no brand.

That’s why changing those elements brings such risks. There’s risk in staying stagnant, of course. There’s risk in living in the past. But in updating, in revamping, there’s danger of the noble past being erased.

There might be no more noble brand than American Airlines, and not just because their name co-opts the vision of a society and the ideals of a people. This company, aloft since 1934, helped create our global dominance in aviation. They’re a legacy of Charles Lindbergh and Howard Hughes. They’ve survived the most momentous age not just of flight, not just of travel, but of human experience.

They’ve also been in bankruptcy for more than a year, and have been held up as an example of the decline of airline customer service. If ever a company might benefit from rebranding, that company would be American Airlines.

Yet somehow, we can give only the most hesitant endorsement of American’s recently unveiled image, in the form of a new logo, company colors, and airplane livery. The look is bold, modern, and very striking. The aircraft livery is gorgeous. There’s little to quibble with here.

But there was little to quibble with in American’s old look, which dates from 1968 and was created by the venerable, honorable design house of Massimo Vignelli. For a brand image that’s pushing a half-century in age, Massimo’s design remains powerfully contemporary. It’s also one of the most recognizable trademarks on earth.

For all that, we won’t say that American’s rebranding was a mistake. For a company as stricken as American Airlines, maybe a rebranding was necessary to break with the past, and to start writing a newer, better narrative.

We just hope the American executives realize that a fresh brand won’t write that narrative on its own. The challenges that American Airlines faces are systemic, not symbolic. A fresh brand might bring a reappraisal from consumers, but only a better way of doing business, and a new commitment to service, will bring those consumers on board.  

The C4:

1. American Airlines has just rolled out a new brand; with a thoroughly modern logo, eye-catching aircraft livery, and even new company colors. (Don’t worry, they’re still American, so they’re still red, white, and blue. They’re just a slightly different red, white, and blue.)
2. This is a company that’s been in bankruptcy since November, 2011. They’ve struggled to present a workable plan for re-emergence. They’ve gained a reputation for abysmal customer service. So yes, perhaps this is a company that could benefit from rebranding.
3. But we’ll miss the old brand, created 45 years ago by superstar designer Massimo Vignelli. Few corporate images that old can remain so appealing, so contemporary.
4. Nevertheless, the die is cast. We hope the redesign serves American well. We also hope the company realizes that now that the designers have done their jobs, it’s up to every employee of American, from baggage handlers to executive officers, to create a strong new airline, worthy of its bold new brand.

AIG Says "Thanks"

We say "Really?"

Well, it’s nice to be thanked.

AIG, or the American International Group insurance company, has launched a 2013 advertising campaign entitled “Thank You America.” The campaign, which will cover print, broadcast, and Web media, is intended to pass on the company’s appreciation to U.S. taxpayers for the largest financial bailout in American history. It also highlights the company’s return to profitablity, and its contribution to communities coast to coast.

We suppose it’s better to be thanked versus the alternative. We’ll admit, though, that the first thing we did upon hearing this news was to check to see if We The People are paying for the AIG’s expressions of appreciation.

We’re not. As of December, 2012, the Treasury has divested itself of AIG stock and has seen a profit of $22.7 billion on its bailout, dating from September 2008, which totaled $182 billion. All in all, that’s not a bad return from a fiscal episode that was, at the time, absolutely terrifying.

But here’s the thing — our well-thumbed ettiquette handbook tells us that gratitude is typically offered for assistance willingly given. Did any of us actually choose to bail out AIG?

Not by a long shot. AIG got bailed out because their bad decisions and poor investments effectively pointed a loaded gun at our collective heads. The Treasury opted to save AIG because not doing so would have likely sunk the economy.

And there’s something frankly self-congratulatory in this “Thank You” campaign. AIG knows, as do we all, that their corporate image was irreparably tarnished in those dark days of 2008. During the financial industry hearings on Capitol Hill, Senator Chuck Grassley (R-IA), famously suggested on the record that AIG executives should resign — or commit suicide.

We won’t go (quite) that far. But we will suggest that AIG’s appreciation might be better expressed more constructively. Couldn’t they have written a check to the Treasury in the amount they’re spending on this campaign? Or given it to the victims of Hurricane Sandy or Sandy Hook?

Saying thanks is supposed to be an act of selflessness. If AIG is able to learn that lesson, we might be more inclined to say, “You’re welcome.”

The C4:

1. The American International Group, or AIG, was laid low in late 2008 after investing heavily in mortgage-based credit default swaps. When their likely collapse seemed destined to crash our economy, the U.S. Treasury bailed them out to the tune of $182 billion.
    
2. But happy days are here again. AIG has paid back all their direct loans, and the Treasury has sold off all the AIG stock it was holding. We’ve recovered that $182 billion, plus nearly $23 billion in pure profit.
    
3. Which is great. Better than most of us expected, in fact. Why then, does it leave a bad taste in our mouths to learn AIG has launched a massive “Thank You America” advertising campaign?
    
4. Because none of us chose to bail out AIG, and because something about “Thank You America” sounds a lot like “Aren’t We Swell?” For obvious reasons, we’re all in favor of advertising campaigns — the bigger, the better, in fact. But in this case we’d rather have seen AIG spend their advertising dollars on a true act of selflessness. That is, after all, how one truly says “thanks.”

A Dark Knight For Trading...

Are these gyrations the dawn of more NYSE angst?

Wall Street and its arcane world of securities trading — could anything be more complex? But really, the principles of stock trading are forthright and easily understood, and haven’t much changed in a couple centuries…

You buy fractional ownership in a corporation. You make money, if not through dividends or shares of profit, then by reselling your shares as their values tick higher. Thus the familiar refrain, buy low/sell high.

The complexities creep in as you try to wrest loose every erg of possible profit. Can revenue be gained when share prices rise by a quarter penny or so? It can, but only when you’re trading thousands of shares, thousands of times per second. Here’s where trading software comes in, the likes of which has revolutionized the securities market.

But it’s also imperiled it.

On August 1, 2012 the Knight Capital Group began executing a series of erratic, rapid-fire transactions that had over 100 stocks gyrating wildly for more than 45 minutes, until the NYSE suspended trading. In the meantime Knight was losing more than $10 million per minute, for a final hit that equaled more than quadruple that firm’s total profit last year.

The culprit of course was software. Knight was trying out a new trading algorithm that had been regrettably rushed into service without due testing and bug-fixing. When you or we come up against a bug, we might curse at a blue screen for a while. When it happens to a company like Knight (which executes trades for Citigroup, TD Ameritrade, and others, and was responsible for 11% of all U.S. securities trading in the first half of this year), markets shudder.

It’s a fact of life in this new century of ours that we rely on technology in more ways than we can count. It’s also a fact that our reliance sometimes outstrips the technology’s capabilities. There’s nothing abstract about binary code that can eliminate vast fortunes in the blink of an eye. We have software today that can bankrupt companies and destroy lives.

If we’re resolved to keep it, then we’d better find a way to make it work.

The C4:

1. On August 1, a trading-software glitch caused 45 minutes of erratic stock transactions that have so far cost the Knight Capital Group $440 million and over 75% of their company value. They’re likely headed for bankruptcy.
2. This is hardly the first time this sort of thing has happened. The Facebook IPO in May was marred by a $40 million glitch and the 2010 “Flash Crash” caused a thousand-point swing in the Dow Jones Industrial Average in just over six minutes.
3. Every broker, day-trader, and 401k dabbler relies on stock-trading software. It’s made our modern securities market possible.
4. But when it goes wrong the consequences are devastating. The risks here are way too high. Stricter regulation is never a popular solution, but if anyone has a better idea for protecting our markets from software glitches, we’re all ears.  

Beware of Greeks Bearing Debt

A symptom of a flawed attempt to unify.

Casual investors, beware: your world has been turned upside-down.

Stocks have become the relatively safe parts of your portfolio. Bonds, which used to be your hedges of first resort, have changed entirely.

Top-rated bonds are all but useless for growth, and will pay practically zero interest for the foreseeable future. Sovereign-debt bonds, a sterling investment just a few years ago, are now almost too risky to contemplate.

What’s changed? It’s easy to oversimplify, but we’ll forge ahead: Greece. Greece has changed everything.

We’re not blaming that incubator of modern democracy, only pointing to it as a symptom. Greece is demonstrating all the perils of the Eurozone, an unprecedented experiment in a multinational currency. Greece is showing how difficult it is for 17 nations to share monetary policy while maintaining economic independence.

There are no easy choices for the Greeks. If they stay in the Eurozone, they embrace another generation of fiscal austerity — strangling any chance of economic growth. If they revert to the drachma they’ll almost certainly default on their national debt.

You say you own no Greek debt? Hold tight anyway. A Greek default, managed in the best possible fashion, will only encourage other teetering European economies to follow suit. Spain, Portugal, Italy, maybe even France, are all at high risk. This scenario, which is unfortunately one of the better possible ones and probably the most likely, means the bottom is going to fall out of the sovereign-bond market.

Forewarned is fore-armed. Think seriously about adjusting your portfolio accordingly. And spare the kindest possible thoughts for our friends and allies across the pond, who are guilty of nothing except a flawed attempt to unite their continent.

The C4:

1. The Greek debt crisis is demonstrating the vulnerabilities of the Eurozone, and pointing to a grim future of cascading defaults.
2. That likely result, coupled with already historically low interest rates on “safe” bonds, means we can no longer rely on the bond market as our hedge against other investment losses.
3. Casual investors (all investors, in fact) need to rethink their strategy. This is a slow-motion crisis that’s giving us time to adjust. Use it or wallow in regret.
4. But don’t blame the Greeks, nor the rest of the Eurozone. They tried. Economic unification is simply an idea ahead of its time.

Dimon In The Rough

$2 billion loss wakes people up early in the Morgan.

Over at J.P. Morgan, it feels like 2008 all over again.

Three weeks after CEO Jamie Dimon said “tempest in a teapot” when asked about the company’s renewed interest in credit derivative swaps, J.P. Morgan revealed that such trades resulted in over $2 billion in losses. The market immediately punished J.P. Morgan, by wiping out nearly 10% of its stock value in a single day.

Two facts make this loss all the more stark. First is that J.P. Morgan isn’t just an investment house. In the latter twentieth century J.P. Morgan benefited from deregulation, which allowed almost unlimited horizontal integration within the financial industry. As a result, J.P. Morgan is now the largest bank in the U.S.

“Too big to fail” almost doesn’t do it justice.

Secondly, we now know the lengths to which Dimon and company went in order to weaken the so-called “Volcker Rule,” which is designed to limit the amount of its own capital a bank can risk. It’s clear now that loopholes in the Volcker Rule, which J.P. Morgan lobbied heavily for, permitted precisely the sort of trading that just cost the company $2 billion.

There’s one hopeful glimmer, though. Perhaps heeding the Golden Rule of Public Relations (i.e., own up to your mistakes, immediately), Jamie Dimon is loudly and publicly admitting the company’s error.

“We were dead wrong,” he said on Meet the Press. “We made a terrible, egregious mistake. There’s almost no excuse for it.”

What comes next? Probably a lot less lobbying to weaken financial regulation. J.P. Morgan and others in the industry recognize this incident does far more to damage their credibility than it could ever do to their bottom line. So they probably won’t want to be seen jockeying for more loopholes, at least not in the short term.

And maybe that’ll lead to the ideal outcome: a financial industry governed by rules that quash recklessness while still encouraging growth. That is, after all, exactly what financial regulations are supposed to do.

The C4:

1. J.P. Morgan announced last week that credit-derivative trading has cost the company more than $2 billion over the course of about six weeks.
2. The day after the announcement, shares in JP Morgan lost nearly 10% of their value.
3. CEO Jamie Dimon quickly admitted culpability and promised a thorough investigation.
4. Only a robust system of financial checks and balances, that encourages growth through responsible business practices, can prevent those “too big to fail” from dragging us back into the nightmare of 2008.

Is the tide rising?

Housing and employment show good signs.

The downturn we call the Great Recession, which was our nation’s worst economic crisis since the Great Depression, began in December of 2007. The recession itself (defined as multiple consecutive quarters of negative GDP growth) ended in June of 2009. However, as we’re all too well aware, the recovery has been slow, halting and uneven.

At last, we’re glimpsing an end to that. If the collapse of the housing industry was what presaged the downturn — and it was — then a housing recovery means good news for us all.

We now know that the rate of foreclosures in 2011 decreased 24% as compared to 2010. The number of homeowners 90 days or more delinquent on their mortgages was down to 7.3% of all borrowers as of December 2011, versus 7.8% the previous December. And the number of U.S. metro areas showing measurable improvements in their housing markets increased to 98, as of the first of this month.

Do we still have further to go, and are there dangers still ahead? Yes and yes. But don’t let that keep us from indulging in a bit of optimism.

The Dow is up and unemployment is down. The housing industry is on its way back. The tide is rising and all boats are being lifted. Let’s enjoy it, celebrate it, and then let’s roll up our sleeves and get back to work.

The C4:

1. The Great Recession (2007–2009) was triggered by a collapse of the housing and mortgage industries.
2. The recovery has been one of the slowest on record, with nearly 18 months (mid-2009 through 2010) of little or no improvement in housing and employment.
3. There’s ample reason for optimism. We’ve seen five consecutive months of improving employment numbers, and a steady rise of the major stock indices.
4. Within Ohio and across the nation, the housing market is recovering. Healthy housing will complete this recovery. Cheers to that!

Crazy? Yep!

You in?

Since 10% of the world’s population is already on Facebook, saying that Facebook is going public is a little like saying Charlie Sheen is going crazy.

But from a business perspective, it’s true (the Facebook part, that is — Sheen’s nuttiness, like Sheen himself, is irrelevant).

Facebook filed paperwork last week for an upcoming IPO. Analysts are predicting the largest tech-sector public offering of all time, maybe even the largest-ever stock launch, period.

We shall see. But what we’ve learned so far, from Facebook’s SEC filings, is in turn instructive, intriguing and even a little bewildering.

The facts: Facebook valuates itself at between $75 and $100 billion. They’re seeking a $5 billion cash infusion, with which they plan a series of strategic acquisitions. And current holders of Facebook stock options, including secretaries, custodians and the graffiti artist who painted their lobby, are about to become millionaires.

But that’s where things get weird.

Facebook stock options have always been a valuable recruiting tool, enticing the industry’s best programmers, designers and engineers. Facebook stock has long been privately traded, so the options have been paying off nicely until now.

But future options, after the IPO, will be seriously devalued, which will in turn hobble Facebook’s ability to bring in new talent. Is Facebook really risking that to raise just five percent of their (assumed) total net worth?

Doubtful. Especially considering that their revenue has grown by double digits every year of their existence. Last year it was a jaw-dropping 84%. This company is not cash-poor.

Something else is going on here, and we will delight in digging deep and discerning what it is. We’ll do so respectfully of course, because we know Mr. Zuckerberg is even now reading these words (Hi, Mark!).

The C4:

1. Facebook, a social media and advertising powerhouse unlike anything ever seen, has filed paperwork for a $5 billion IPO.
2. A successful stock launch will enrich hundreds of Facebook employees who have benefited from deferred options.
3. Future stock options may be diluted due to the millions of new shares about to be issued. This will surely impact Facebook's ability to attract new talent.
4. We're puzzled and intrigued, and watching closely to see who gets egg on their Facebook.