Category: Co-ops in Capitalism

Last week I quoted New York Times columnist David Brooks’ philosophy in which he distinguished resume virtues from eulogy ones.

Résumé virtues are what people bring to the marketplace: Are they clever, devoted, and ambitious employees? Eulogy virtues are what they bring to relationships not governed by the market: Are they kind, honest, and faithful partners and friends?

This past weekend I received a copy of a funeral message from a friend I have known since college. His wife of 28 years had died in January.  She had been chronically ill their entire marriage–some of the times were good, but others in and out of hospital.

He celebrated her spirit with these words:

She was the most selfless person I have ever known. I really believe she hung onto life all these years for us, and I hope the rest of my life will be worthy of her sacrifice, because it was not easy for her to stay with us. She gave her life for her friends and family.

Organizations Do Not Have Souls

In the life witness of Jan Karski which I described last week, I quoted his observation that “Governments do not have souls. Only people do.”  I believe his words are applicable to any organization not just “governments” which was the focus of Karski’s anti-Nazi Polish underground activities.

Doing the right thing is sometimes very hard.   Especially when one’s views set them apart from the prevailing practice or beliefs of the organizations in which they work or are members.

Puritan John Winthrop in this lecture (A Model of Christian Charity) prior to sailing for the new world, warned his fellow Puritans that their new community would be “as a city upon a hill, the eyes of all people are upon us”, meaning, if the Puritans failed to uphold their covenant with God, then their sins and errors would be exposed for all the world to see.

That biblical reference of “a city upon a hill” has been later used by four Presidents to describe their vision for America.

Cooperatives were endowed with the hope of being  “a city on the hill” in a country where individuals were often taken advantage of by the prevailing economic system. That system still exists today.

What the above examples suggest is that credit union design is not what makes the difference.  Rather it is the quality of leaders chosen to continue a firm’s legacy.

Being in the minority, such as living at the boundary between health and illness in the circumstance referred to in the funeral, is never easy.  But examples of resolution and spirit should remind us of the aspirations of our own better selves.

In America, the public has traditionally associated prophecy with forecasts about the future.

However their religious and political context  is quite different.  In past and present  societies, they are seen as troublemakers.  Richard Rohr, a Franciscan priest and founder of the Center for Action and Contemplation describes how this “truth-telling” might be viewed today.

After reading his understanding of prophets, I wonder if the credit union movement could benefit from this voice today?  Or is each credit union’s current profit more than sufficient?

The Prophet from Richard Rohr

“One of the gifts of the prophets is that they evoke a crisis where one did not appear to exist before their truth-telling.

“Prophets always talk about the untalkable and open a huge new area of “talkability.” For those who are willing to go there, it helps us see what we didn’t know how to see until they helped us to see it.

“It’s the nature of culture to have its agreed-upon lies. Culture holds itself together by projecting its shadow side elsewhere. That’s called the “scapegoat mechanism.”

“It seems the prophet’s job is first to deconstruct current illusions, which is the status quo, and then reconstruct on a new and honest foundation. That is why the prophet is never popular with the comfortable or with those in power. 

“Prophets are difficult to have around. No one wants to claim the title or do the work because of it. In this postmodern age, everybody is uncomfortable with prophets. They yell when you don’t want them to. They ask for trouble when you could avoid it. They don’t have a politically correct bone in their bodies….

“Prophets are leaders, but not leaders of their own choosing. Inevitably, they have some sort of . . . encounter. . .They’re quirky and more than a little weird. “

Please share any experience with credit union prophets which you have seen currently.  I would like to share their message.

At the beginning of the year, business firms, families and individuals take stock of their financial situation.  The results of last year are known. January brings the credit card bills from the holiday.  Taxes come due.

This year all segments  are reassessing their liquidity situation amidst rising interest rates and growing layoffs.

A Financial Disneyland

Since 2008’s financial crisis erupted, credit unions and members have been living in a financial Disneyland.  Interest rates were kept at historical lows.  The recent Covid response resulted in two years  of short term rates at or near zero.

The Fed’s monetary policy of quantitative easing flooded financial markets.  When capital no longer costs anything, most investments look safe. Returns on short term government securities or insured savings were most recently in single basis points. People and organizations tried new or speculative assets  such as meme stocks or crypto solutions.

The disciplines of long-term investing were overlooked. The risk-reward calculus became warped. Market and housing returns suggested only upside.  Everyone could become a winner.

What We Believe About Money

Call FCU has an unusual member financial education program.  It begins with a questionnaire.  The purpose is to learn your personality type, or in their words, “the strengths and weakness of your relationship with money.”

Everyone has a different approach and individual situations when the talk is about savings, spending and financial goals.   We live in an economy in which consumer spending drives 70% of the output.  Wealth, fame and power are the trinity of individual success for many in a capitalist economy.  Moreover if one achieves the first, the other two can be bought.

How a person or firms manage their finances express our values and ambitions.  So I think Call’s approach is an important first step in any person or organization’s approach to 2023.

One Organization’s Statement of its Financial Philosophy

Non profit organizations have a unique relationship to finances.  They are not in business to build wealth, but they must demonstrate stewardship to donors, or like private business, they can cease to exist.

The Center for Contemplation is a 501 C 3 founded by Franciscan Richard Rohr to put spiritual unity  as the center of religious practice.

The organization has published its organizational financial approach.  It defines this as a “complex process that codifies their relationship with money: how they  raise it, manage it, and spend it. Our financial philosophy centers on values concerning donations and the stewardship of resources. Those financial principles are:

• We operate from a clear definition of “enough.”
• We practice transparency.
• We seek for money to never be the barrier to participation.
• We understand exchanges of money first and foremost as vehicles for advancing our mission and message.
• We commit to spend simply, equitably, and sustainably.
• We lead with giving and generosity.

Should credit unions create their own statement of financial philosophy?  Is a business plan a sufficient roadmap?  Does operating in the context of cooperative design and values provide a complete picture?

Might a credit union’s leaders consider the CAC’s principles above and ask whether they describe their financial philosophy? I believe the exercise could be as revealing as Call FCU’s individual assessment.  For example, when has a credit union ever defined what “enough” might mean?

Amahl and the Night Visitors-How the Story Ends

In an earlier post about credit union’s most essential members, I quoted an aria from the short opera Amahl and the Night Visitors, Do Rich People Know?  The  mother lives with her crippled son. The three kings spend the night before continuing their journey.  The mother tries to take one small nugget and is caught stealing by the King’s page.

Here is how that confrontation works out in the opera’s final lyrics:

MELCHIOR (seeing what has erupted) Oh, good woman, you may keep the gold. The child we seek doesn’t need our gold. On love, on love alone he will build his kingdom. His pierced hand will hold no scepter. His haloed head will wear no crown. His might will not be built on your toil. Swifter than lightning, he will soon walk among us. He will bring us new life, and receive our death, and the keys to his city belong to the poor. Let us leave, my friends.

MOTHER Oh, no! Wait! Take back your gold! For such a king I’ve waited all my life… and if I weren’t so poor I would send a gift of my own to such a child.

AMAHL (pipes up) But, Mother, let me send him my crutch. Who knows, he may need one, and this, I made myself.

MOTHER (drawing in a breath sharply) But that you can’t, you can’t! Suddenly, Amahl begins to walk without his crutch.

AMAHL I walk, Mother. I walk, Mother.

First Things, First

As we enter a new year with both individual and corporate financial challenges, should we first ask what our relationship to  money is?  What “crutches” do we lean on to get us by?  What if we risked giving them away to find out who we really are, as a person and leader of a financial service?

Where does moral courage come from?  How do we learn it?

That was the question asked of the actor in the one-man play about Jan Karski.  His character was a  soldier, member of the Polish resistance, and diplomat during  the most extreme conditions of WW II.

Karski had a photographic memory and made detailed reports of conditions as a courier in 1940–1943 to the Polish government-in-exile.  Jewish leaders in  Warsaw requested he visit the city’s Ghetto and Belzec death camp.  They asked him to report what he had seen of the Nazi efforts to exterminate the Jewish people to the Allies.   He did.

He was captured, tortured by the Gestapo who sent him to a hospital. His SS captors hoped to break him to learn the details of the Polish underground movement.  He escaped from the hospital.  The Nazis killed all of 32 hospital doctors and nurses where he had been treated.

He spoke directly with Churchill and Anthony Eden, the British Foreign minister.   In the US he met with FDR plus national political, press, and Jewish leaders including Supreme Court Justice Felix Frankfurter.  In all his meetings he gave great detail of what he had seen. He  asked Allied political leaders in both countries to act, to stop the Nazi’s genocide.

His wartime efforts are presented in a film Remember This of this one-man play.   It has just been released in heaters and will be shown on PBS Great Performances in March.

Why Remember?

Karski’s story is about more than the Holocaust.  It is about human nature in all its greatness and horror.

His words, not just his personal example, live on as timeless and timely insights into human character.

In the film he observes, “Humans have an infinite capacity to ignore things that are not convenient.”

This looking away occurs beyond  the horrors of war;  it is true of everyday life.

He commented that “Governments do not have souls.  Only people do.”  Caring for fellow humans is not done by organizations, policies or even regulation.  That is the responsibility of the leaders and members of an organization. There are no market “invisible hands” doing humane work.

When he briefed  Justice Felix Frankfurter, the first person of Jewish faith on the Court, Frankfurter replied, “I don’t believe it.”   He was not calling Karski a liar; rather he could not comprehend how humans could possibly be implementing a plan to eliminate an entire people.

A “Living Relationship”

Karksi stayed in the US following the war.  Poland was occupied by the Soviet Union.  He could not return.   For 40 yeas he was a professor of International Studies and Polish history at Georgetown  University.

He was awarded the Presidential Medal of Freedom by Obama a decade after his death in 2000.

Even with this heroic story, one of the co-writers of the script on the faculty at Georgetown, confessed he had walked by Karski’s campus statue for four years and paid no attention to it.

That typical oversight is why stories need be told.  And for their relevance to today’s and future generations.

The actor in the film stated he has “living relationship” with his character.  Karski’s life resonates still.   It is more than a remembrance of an extraordinary person.  It is an example that inspires, even compels us, to ask about  at our own lives.

Our Witness Today

In the Q&A following the film’s showing at the Shakespeare Theatre in DC, the question was asked of the actor: How did Karski develop the moral courage to act in these extreme circumstances?

The actor replied that he thought it was from his mother, a devout catholic.

I believe that people learn their values from watching others.  Whether in extraordinary acts of courage or lives long lived in service to people, we select those qualities we want to express in own professions.

Karski’s example is helpful for those working in the cooperatives.  One of our distinguishing features is an organizational design based on values and collaboration. We are called to a higher standard than might be practiced in other firms.

Credit unions were intended to protect and serve those who are exploited by others.  Our meme is the little guy with the umbrella.  But how easy is it to ignore our cooperative roots and imitate institutions for which credit unions were intended as an alternative?

Do we transfer responsibility for outcomes onto the organization in which we work?   Karski reminds that only persons have “soul,” that is the capacity to do the right thing.

It is not the cooperative model that fails.  Human agency matters whether consequences seem trivial or of utmost concern.

What I find compelling about his example is that after Allied leaders failed to respond to the Holocaust tragedy he reported, he never blamed others for inaction.

His witness of moral courage was not a basis for faulting others.   He did the best he could so that future generations could benefit from his example.

That’s why the film is called Remember This.

Organizational isomorphism.  That is a big word for the tendency of organizations in an industry to follow the herd.  Do what the other firms do and remain with the crowd.   To act contrary to the consensus is dangerous.   Staying in the herd protects individual reputation and accountability.

John Tippets, the longtime CEO at American Airlines FCU described this conforming tendency in his speech to the Navy FCU board in 2001:

One of the challenges of leadership is to constantly sort through popular ideas advocated by credit union peers. 

It seems that at every meeting, someone has a new fad or a new idea – they’re sure it’s the greatest thing since sliced bread!  A director will return from somewhere thinking he’s got the greatest idea; a staff member or a vocal member of the credit union will bring in great ideas. 

But many of these ideas do not fit.  For example, AAFCU has not felt comfortable about indirect lending; we do not actively participate in risk-based pricing; we do not see a fit for select employee group (SEG) expansions; we didn’t understand how dial PC banking could preserve our economics; and, so far, even credit cards do not seem to fit.  We declined to do these things because we haven’t been able to make them fit into our models. 

You have to make choices and you have to make trade-offs.

Layoffs in Tech:  Necessary or Herd Mentality?

Alphabet’s (Google’s parent) reported a 36% increase in 4^th quarter 2022 profit to $20.64 billion.

At the same time as these record financial results, the company announced 12,000 layoffs  or 6% of its workforce.  The public explanation was over-hiring during the pandemic growth and doubling down on AI solutions in the future.

Why all these tech layoffs after record profits and rising revenue?   If the average laid off employee cost $200,000 per year, then Alphabet saved $2.4 billion, about 10% of one quarter’s profit.

It doesn’t compute. Here is one writer’s interpretation in an article The Tech Layoff “Contagion.”

The industry is having a midlife crisis. And that means once the crisis is over, a new era will begin. . . More likely, we are in an intermission between technological epochs.

Some argue that, as they wait out this intermission, CEOs are copying one another—laying off workers not simply as an unavoidable consequence of the changing economy, but because everybody else is doing it. “Chief executives are normal people who navigate uncertainty by copying behavior,”  writes Derek Thompson of the Atlantic staff.

He cites business professor Jeffrey Pfeffer, who told Stanford News: “Was there a bubble in valuations? Absolutely … Did Meta overhire? Probably.

But is that why they are laying people off? Of course not … These companies are all making money. They are doing it because other companies are doing it.”

Pfeffer believes this “social contagion” could spread to other industries. “Layoffs are contagious across industries and within industries,” he said in the Stanford News article. If so, the story of tech layoffs could end up being a much broader story about work in America.

A Cooperative Opportunity

Because credit unions do not have a stock price, they can resist  market expectations and respond in ways for-profit firms cannot.

In the 2008-09 financial crisis credit unions continued to lend to consumers, when every other firm pulled back.  Who would want to make auto loans  when all of the major US  manufacturers were threatened by bankruptcy?  Both GM and Chrysler were reorganized in 2009.  But credit unions continued to lend on these brands.

Sometimes crisis can motivate credit unions to become more of what they were designed to be: a counter cyclical option, to be there for members when other firms pull back, reduce staff, eliminate products and shortcut customer service.

A Strategic Misread

Another factor in the tech layoffs is the possible strategic misinterpretation of Covid’s impact  on consumer behavior and market evolution.  Derek Thompson suggests this possible misreading of the future:

Many people predicted that the digitization of the pandemic economy in 2020, such as the rise in streaming entertainment and online food-delivery apps and at-home fitness, were “accelerations,” pushing us all into a future that was coming anyway.

In this interpretation, the pandemic was a time machine, hastening the 2030s and raising tech valuations accordingly. Hiring boomed across tech, as companies added tens of thousands of workers to meet this expectation of acceleration.

But perhaps the pandemic wasn’t really an accelerant. Maybe it was a bubble.

Choices that Fit the Cooperative Model

Many credit unions also followed this same future assessment, investing in digital and fintech startups as the inevitable pattern for future success.

Yet the strength of credit unions is their member relationship, not their technology leadership.  Employees are the single most important aspect of this service advantage.  Laying off staff or other “potential recession’ cutbacks, could compromise credit union’s mission when most needed.

As Tippet’s explained he would sometimes shun the prevailing wisdom: We declined to do these things because we haven’t been able to make them fit our model.

Credit unions begin the year on a sound financial and earnings base. Whatever the economic and interest rate events in 2023  now is not the time to copy market expectations to cut back.   Especially by laying off those who make the difference when serving members.

Plus honoring a firm’s obligations to its employees If the economy turns sour, is the right thing to do.