Bill Gray

Today Obama reiterated his belief that banks are to blame for our current financial crisis. In my opinion, Main Street greed is just as much to blame as Wall Street greed.

Let’s look at the sub-prime mortgage situation that pricked our housing bubble. Using a supply and demand framework, Americans demanded more expensive homes and banks responded with a supply of sub-prime mortgages. In this context it was the common interest (greed) of both parties that created the market. Therefore, it is only logical that both parties should share the blame.

When trouble arises in markets, Americans generally blame the suppliers. In the 1970, when drug use was on the rise in the United States, we engaged in a War on Drugs with drug suppliers (cartels) in Columbia. As tobacco use rose, we fought the Big Tobacco industry. History has taught us that the war on drugs must be fought at home with drug prevention and education. Anti-smoking campaigns have been a huge success and tobacco use has declined accordingly. In both cases, the key to success was focusing on curbing demand with consumer education.

The regulation of credit card lending focused on the suppliers of debt (banks) and has been generally unsuccessful. The most profitable customers for credit card companies are still the individuals who make minimum payments, and generally make these payments after their due date. This market has become somewhat efficient in that several credit card counseling and debt consolidation services are now available. You may have seen some of their advertisements on television.

I think our regulation of the credit card lending is a good indication of what will take place on Wall Street. There will be more paperwork and disclaimers associated with high interest rate mortgages. This will certainly increase costs for consumers while providing some indirect education on the risks associated with high interest rate debt.

A more effective approach is to directly educate consumers on the risks of high interest lending. The US policy is that everyone should have the opportunity to own a home. If the path to home ownership requires financing with ARMS and balloon payments, we have an obligation as a society to offer education on these financial instruments. To the best of my knowledge, there is no large scale program in place to educate our citizens and students on home ownership.

A recent study found that only 8% of Americans consistently achieve their New Years Resolutions. 68% of the respondents are successful some of the time, and 24% have failed on their resolutions every year. You can find more statistics on New Years Resolutions here.

There are many commonly discussed explanations for why our resolution are often unsuccessful. Some of these explanations include setting expectations to high, lack of good planning, and absence of a reward structure for your goals.

Today I thought of another reason – our society has shifted away from an annual productivity cycle. A few generations ago when we were all farmers, annual resolutions were logical and could take the form of planting and harvesting goals. For example, a farmer could plan around planting and harvesting an extra acre of corn. Now, the vast majority of us are at least a couple degrees removed from the planting cycle, and have much shorter productivity cycles. Some examples of modern day productivity cycles include:

students and teachers – most schools follow a semester or quarter calendar

sales professionals – often have monthly sales quotas

corporate executives – public companies file quarterly earnings with the government

Let’s take the example of a college student who wants to improve their grades. Setting a goal to get better grades in 2009 would probably be successful during the student’s first quarter of school. However, the goal may be forgotten by the third and fourth quarter and would then go unfulfilled. Now compare this to a student who resolves to get better grades at the beginning of each and every quarter. We would expect this second student to be more successful over the course of the year. Thus, matching goals with productivity cycles is almost certain to produce better results.

I am now setting goals for the first four months of 2009. This time frame aligns with my last two quarters of school. I will graduate in May and will then set goals for the summer.

Kristy and I enjoyed nine days with our families over the holidays. We spent much of the time conversing over meals and drinks, and needless to say I returned to Charlottesville with a couple extra pounds around my midriff.

In reflecting on our dinners, I  wonder at what point a ‘great spread’ turns into overindulgence. Rather than spend too much time contemplating the past, I made a resolve to spend more time contributing to the community next holiday season.

My idea is simple – next year replace one family dinner with a community service activity. Some of the volunteer opportunities I found include boxing meals at the local food bank, helping with a childrens home’s holiday party, and volunteering at a shelter.

If you’re looking for volunteer opportunities, http://www.1-800-volunteer.org/ is a good place to start.

In August of 2007 I began a two year MBA program at the Darden School of Business. One of my ongoing goals is to improve my writing ability, and I therefore created the Darden MBA Student Blog to develop this skill while sharing my MBA experience with prospective students. Next spring I will graduate and my postings on the Darden MBA Student Blog will come to an end along with my MBA experience.

This blog will be my new writing platform. In the months to come I’ll share my plans for an intended focus and target audience. It is often said “if you don’t know where you are going any road will get you there”. Rest assured, I have a destination in mind and no time to ramble.