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Terminal Value

Leadership in the Post-Pandemic Era with Tom Cronin

Doug Utberg

Business Growth Authority | Technology Strategy & Resourcing | Cost Optimization Expert | Business Process Architect | Financial Strategist | Founder - Terminal Value Podcast

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We have Tom Cronin with us. And as we establish in the preshow, there is no relation to Kevin Cronin, the lead singer for Arya Speed Wagon. My wife and I actually went to go see it early in 2022. But what Tom and I are going to be talking about today is we are going to be talking about kind of leadership in the current era because, Tom don’t let me steal your thunder here. But because I think in the past, leadership has really been seen as having a position of authority, whereas now that authority based leadership. Well, I would argue that authority and leadership have nothing to do with one another. You’re a leader of somebody follows you because they want to, regardless of whether you have authority. And I think that some people are starting to get it and other people are trying to ignore it and failing badly. Tom, introduce yourself and help me find my blind spots here.

Yeah. Look, it’s great to be here. Thanks for inviting me along. Just very short. I’m a meditation teacher, coach, produced a film, The Portal, and written a number of books. I spent 26 years in finance as a broker, very much Wolf of Wall Street style broker for the first early stages of that career. And then I found meditation and went through quite a metamorphosis as a result of exploring spirituality and meditation and eastern philosophy and leadership in today’s world is being forced into a very different paradigm because of our immense adaptability and our ability to change very quickly, which means that if we don’t like a leader of a particular organization or a company or something like that, we’ll just move. In the past, people had a job, and if that leader of that organization or that company was a bit of an asshole and not very nice, but people needed that job and they didn’t have any other options, and they kind of put up with being treated in a particular way or not being inspired by that person. But these days, leadership is like you said, it’s less about being in a place of authority and being in a place of inspiration and authenticity and integrity. And people are looking at you as a leader in what you’re embodying, what are your visions, what are your missions, what are your values and are you really embodying those? Because if you’re not, then, hey, we’re just going to go to another company that’s got something more aligned to us. And as the masses start to go through a conscious awakening, their expectations of the people in the organizations they’re going to work within or they’re going to be part of that could be political parties, sports organizations, business organizations, Church groups, all leaders in these areas, in all areas of life, really these days, there’s going to be such higher expectations of those leaders to represent embody and to show a way forward, which is a direction that humanity actually wants to go in.

I think that’s really highly true. Okay. So let’s kind of take it back to the practical here. Of course, the audience for this show is a business focus show, so it’s going to be founders, entrepreneurs, executives. So if you’re in an organization, how do you take that piece of insight and turn that into a better situation for you, for your people, for your leadership?

I think what’s going to happen, and we’re seeing this already now. We can no longer have a business or an organization that is purely about bottom line. We have to look at a very holistic approach to our role in society so that business has to consider all of their touch points, all of their ways that they impact society from what is their refuse rubbish that they’re sort of no longer needing? Where does that go? And how are they involved in the safe and responsible removal of that? How are they involved in the health and wellness and the mental health and wellness of their staff? And so that their working environment is very much a holistic approach that makes their staff feel elevated and inspired. What is their approach to their business and the products that they’re creating or selling and whether they’re contributing in a positive way? So if you’re a tobacco company, you have to really question what is our net positive contribution to the world as a result of our product. And if your product is not uplifting, inspiring and improving society, you have to really question what your product line is, because they’re going to come under a lot of pressure as well.

The world is wanting and expecting a whole lot more from our businesses, and that’s in every single shape and form that we’re involved in that business, it’s no longer just about a product and a bottom line anymore.

Yeah. Well, I was thinking, too, if you’re talking about, let’s say, tobacco companies or other types of industries. Attracting and retaining the kinds of employees who will lead the company forward is going to be getting increasingly difficult because, of course, as you said. The paradigm is shifting, I think, from transition or from authority to vision. And there are certain types of companies where people with vision will not self select into well, in fact, I think a lot of companies are going to be struggling because I think a lot of people with vision are deciding to go out on their own or are deciding to start something to do a start up, as opposed to deciding to be inside of a hierarchy. And so I think there’s actually a really drastic shortage of vision out in a lot of leadership positions. Again, I’m just theorizing here because I don’t know everybody clearly, but just what I’ve seen is a lot of people who kind of have that vision are self selecting, selecting to go kind of in their own direction. As opposed to trying to work from inside a company. Is that something you’re seeing, too? Because it’s entirely possible that I’m totally off base here.

Not exactly pinpointed on what’s actually happening in our world today is that you can be in a company. And if you don’t like the vision and the nature of that company, maybe the leadership is not on point, maybe not embodied and authentic and showing integrity, then it’s very easy these days. It wasn’t 50 to 100 years ago because companies were run by very large organizations, big, powerful conglomerates. Whereas these days you can have a startup in the back of someone’s lounge room. And that startup can be a billion dollar business within two or three years. We’ve never seen the ability for companies to scale so quickly with just an idea and a few people. And so now what we’re seeing is that immense adaptive capacity within the workplace for people to go, hey, this company, I really don’t like it. And next thing up, pops another company with similar quality, similar nature. And this is the beautiful characteristic of our adapting world, is that competition drives increased quality, because if you’re not showing the quality that you should be showing in the organization, someone can create something that is faster, period, very quickly. And that’s going to keep you on your toes.

Yeah, absolutely. Well, okay, so now we’ve kind of unpacked some of these dynamics. What do you think they’re going to mean over the next five years?

Gosh, I think we’re in for some really challenging times. I don’t have a Crystal ball in front of me, but I do think we’re on the edge of some very tricky times. We’re seeing rampant inflation. Inflation numbers in the States last night were very high again.

I’m sure the inflation numbers in Australia are plenty high, too.

Well, we had an article yesterday that two largest grocery suppliers, it’s like your Walmart, Woolworths and Coals. Here they were saying that they’re seeing 95% inflation in food prices just in the last twelve months. I mean, that’s phenomenal. To see food prices double. With inflation comes rising interest rates. With rising interest rates come immense pressure on mortgages and debt. And we know that there’s immense levels of debt within the government and within the household.

I’m just going to interject a little bit here because this is actually kind of a solo episode I recorded a couple of weeks back, which is that at least one of the things that I keep track on is I think the total amount of debt outstanding in the US. I also track global. I think US is around 85 trillion in global is around 300 trillion. But the thing, at least in the US that I think is really worth paying attention to is that approximately one out of every five publicly traded company is what they call a zombie company or a company that is not currently paying down its debt so in other words, it’s only able to make interest payments or maybe not even make interest payments. So what that means is they don’t really have the capacity to make future investments or to make investments in either R&D or in capacity or whatever. They’re really kind of just sort of holding on. And when interest rates inevitably rise because they’re going to now, they can be pushed into a debt spiral. For people who are newer to some of the finance terms of debt spiral is when a company gets to where their interest payments are so large that they have to take on more debt in order to make their interest payments. Well, eventually what happens is the creditors start saying, wait a second, I’m not giving you any more debt, and then they can shift over to being insolvent. And so if you get too many companies that go into that debt spiral now, you’ll start to see bond defaults. And my view is I believe that there’s a market deleveraging coming. So deleveraging is where when you have a sell off of assets, and particularly if you have assets that are financed with borrowed money at some point, it’s called a margin call, which is where when the price goes down a certain amount, you have a force liquidation so that whoever is loaning you the money can get their money back and you get a whole bunch of people selling at once with no natural buyers. That’s what happened in 2008 when prices just and also what happened in around 2001 or so with the tech crash, when prices just fell to the floor. Now, again, I don’t have a Crystal ball either. I’m just looking at what I can see.

Yeah, I would have to concur very strongly. I see a very similar thing happening. I’ve been looking at balance sheets of low companies. I see huge amounts of debt, very low profits, if any profits whatsoever. Many companies trading on very high evaluations with zero profits for a long time. There was some ridiculous float the other day in America DoorDash. I think it was haven’t made money in eight years and was valued at something billions in the float. And it’s just like the chance of them actually ever paying that getting into cash flow positive territory is going to be almost zero. So it’s just not to pinpoint one particular company, but I think there’s a very high risk appetite going on in the investment world at the moment. I think we’re going to possibly see some ramifications of that over time. Look, I think companies are going to come under immense pressure. We’re going to have to be very nimble, very agile, very adaptable, and I think there’s going to have to be a very much a tightening going on in expenditures. So it’s going to be a precarious time, I think, going forward.

Yeah, well, but then, of course, every chaotic time period also brings with it opportunities. Whenever you feel that tendency to say, oh, well, it’s going to be tough. That’s just great. The party is over. Just understand

there’s always an opportunity associated with every difficulty.

It’s really just incumbent upon you, me, us to figure out what that opportunity is and then find a way to serve people based on what is needed in the new environment.

Yeah. I like the word you’ve got behind your terminal value. It’s kind of interesting, isn’t it?

A little bit of a little bit background. So there were two motivations behind that phrase. Number one is that my original idea for my podcast was The Business of Life, but that was already taken. And so where terminal value came from is it’s a little bit of a double on Tundra? Because if you have a background in finance, you know, the terminal value is a key assumption that’s made in discounted cash flows, which, of course, is the kind of the main meeting of the title. But since you were in finance, you also know that terminal value assumptions are almost all nonsense. There’s something that you make up. Typically, it’s a value that you inflate in order to try to get your discounted cash flows to hit whatever your hurdle rate is. So that was actually a little bit of the idea behind the title was a little bit of a joke about this silly nonsense that goes on in financial analysis.

This value, which is the price of something or the worth of something. But then you have values. If you just put an S on the end of that word, it completely changes the word. If you look at values, it’s like the morals, the ethics, the core integrity of something. And so I think what we’re going to be looking at is less on the value of a company, more on the values of a company. And I think this is going to be so important. And I think this is going to be a big shift in what is the values of that company. And that’s going to make a big difference, I think, in a conscious environment and a more conscious world.

Got it. Well, that’s really excellent. Let’s unpack that values idea a little more. So as companies are really thinking through what their values are, how do you see that playing into their kind of their local and global competitiveness? I would think that one of the primary ways where values would value plural would make a difference, would be in your ability to attract and retain talent. But I may not be thinking about all the ramifications. Let me know if there’s something I’m missing or if there’s some additional color we should add to the analysis.

Yeah, absolutely. It should be a lot broader than that, for sure. And we’ll see this. There’s a great discussion. The film that I produced called The Portal, has a great thought leader in. It called Daniel Schmacktenberger, who’s based, I think, from Ensenada or San Diego incredible mind and doing a lot of mentoring for some big businesses. Highly recommend checking him out. He’s part of the Conscience Project, and he talks a lot about leaving behind a Game A world and moving into a Game B world and a Game A world is a win lose paradigm, and it’s a finite game that has an end to it. Like most of the games that we play in the current game, A world have a finite end to it, and they have a winner and they have a loser. And this is in business, it’s in politics, it’s in sport, in schools, it’s all the way through. But in a Game B World, because the state of consciousness that operates the Game B world, it’s not coming from an egoic structure. So the Game B World is an infinite game. That the point of the game is to not actually win the game. The point of the game is to keep playing the game. And in a Game B World, we actually don’t have competitors. We have colleagues or comrades, and these are people that are contributing like you to a better world and that your products are making life a better place. The organization is making the world a better place because of the staff and the uplift and the support you give your staff. Everything about that company should be really looking at the values in every single touch point that that has with the world, and that it’s not like even with my business, there’s what could be seen as competitors in that I teach meditation, and there’s a lot of other organizations when we do an avatar study with some marketing agency, they’re like, okay, who are your key competitors? And I have to explain to them that they’re not competitors. In my mind, they’re working with me to make the world a more conscious, more enlightened place. And when we have a more conscious, more enlightened place, we have a better place as a whole. And so it’s less about how much money can we extract from our competitors. More of our founding starting intention is how can we make the world a better place? And if along the way we have a product that does that, then we should have a really good business model as well.

Well, I think that one of the things that you’re touching on, which I think is really important, is that the old I think you would call it a Game A paradigm is that you set up a market, and your implicit goal is to gain 100% market share in that niche. And so then what you end up doing is you end up having a total addressable market. Right? You have a total attainable market, your share of available market. You start trying to say, okay, how can we take share? Who are we going to take share from? What’s the product mix all those types of things. Whereas I think that what you’re essentially saying is that’s really not the way that a kind of a game B business is oriented. The way that a game B business would be oriented then is to say, okay, essentially what I’m supposed to do is I’m defining a group of people whom I am intended to serve, and the way you measure success is if you are able to continually profitably serve them, and if the answer to that is yes, then you’re meeting your objectives. How close did I get?

Yes. It’s really I was thinking why you were talking and I kept looking at the work behind you value. And I think what’s happening here is I’m kind of making this up as we go.

It’s my favorite kind. It’s my favorite way to do it.

The value of a company will be based upon their values first, and then if their values are set in order and in place and they’re meeting and realizing their values, then that’s the value of the company is that their values and their contribution to society. Now what we tend to do is we value a company based upon the value of the company, the financial value of the company, and we don’t take into any consideration the values of the company. But when we start taking into consideration in a game B or the values of the company, that’s the value of the company. They’re building new economic models which are really fascinating. Where the remuneration in a Game B economic model will be on the contribution that the company or individual makes to the world rather than what they can extract out of the world. Because the Game A world is about extraction, what can we extract financially or timber out of the trees or honey from the bees or, well, from the oceans? What can we extract and commoditize? And in a Game B world, it’s less on commoditization, it’s more on values and contribution, and it’s a very different financial model. I’ve even struggled to get my head around it. But what they were saying was that in this model, the way they renumerate and reward will be based upon values and contribution. And so someone like Amandin, who’s in our film who does incredible work in very challenging environments around the world like Africa and Middle East and places like that, they said she’ll be a very wealthy person in, again, the economic model because she’ll be measured on her contribution. And the way the value system and the economic business model will be set up is that there’ll be a reward system. I don’t understand it. It sounds very idealistic, but who knows? Maybe these types of things in the future are actually what we’ll be creating in a new economic model, because the current economic model is very unsustainable.

Yeah. And I completely agree because one of the things that I like to think about whenever I’m assessing a kind of market idea, whatever situation is kind of where did it come from? What’s its history and kind of where it is now? And so, for example, if you talk about financial markets, the initial purpose of financial markets was just to provide liquidity. And the way that pretty much that every security was valued up until really up until about the time of the ERISA act in the mid late 70s was based on its dividend stream. Well, essentially now what’s happened is the financial markets have turned into a giant casino, which is where people trade shares, assuming that somebody else is going to bid more for them. And so the valuation ratios just keep going up and up. But as we said, at some point that’s going to meet an enormous deleveraging. And so again, I’m just spitballing here, but there’s a part of me that almost wonders if there is going to be like a kind of a left hand turn away from, say like public markets and their kind of associated volatility toward more of like a scaled crowdfunding model. Because I think if you get some kind of scaled crowdfunding that feels like a model that would be more in line with value, with a values based valuation. The only thing is that I think the only way you get from where we are now to there is you need to go through just a tremendous economic calamity to where enough people say, hey, the current model isn’t working. Because right now there’s a lot of people have a lot of 401K balances that are tied up in the financial markets. And I don’t wish tremendous calamity. I think that what I wish is ultimately irrelevant. I think the calamity is coming. I think the question is going to be whether it is strong enough and deep enough to inspire and almost force a change in a change in the model .

A hundred percent. It’s the analogy I like to use and we use this in the film. Daniel Schmuckberger does a great exploration of this analogy or metaphor, which is the caterpillar morphing into the butterfly and doing that chrysalis moment. Now, the caterpillar can’t coexist with the butterfly. There must be a death of the caterpillar, which is the old system collapsing, so that the new emergence of a new paradigm, a new status quo, a new way of operating can exist only with the removal and destruction of the old. And so therefore, we will see during that collapse a very difficult time, but it will only be the revolution and the evolution of an outdated, unsustainable model. And so, unfortunately, what we’re seeing Interestingly, and I don’t know enough to be an authority on cryptos, but what I’m still seeing happening in cryptos, unfortunately, is it gives us this possibility because it is a ground up type model that is deregulated and decentralized, which is exactly what’s going to happen in all areas, from social media, from media, which was centralized and regulated to social media, which is decentralized and a little bit regulated. But we’ll see that go through its own Chrysalis and more metamorphosis over time as well. But we’re definitely seeing more power to the people through social media. We’re seeing that going to happen eventually through the finance system, which will be through something like cryptos or crowdfunding. But at the moment we’re still seeing that game, a model emerging in the crypto space, which is windows paradigms vying for scarce resources, debt obviously emerging in that model as well. How do we scale this? How do we leverage this? How do we try to debt model out of this?

And I think Bitcoin in general I think is extremely destructive game a paradigm because of this whole Bitcoin mining thing. Now, I still don’t really understand why the idea because of course, for people who are kind of new to Bitcoin, the way Bitcoin mining works is that the supply of Bitcoin is constrained based on the completion of these extremely complex algorithmic puzzles, which you basically have to throw compute power at. However, there is no intrinsic value behind any of those puzzles. All it is is it’s just a throttle mechanism to keep the market from flooding with Bitcoin. So you end up with a large amount of what I call fake work. There’s a whole bunch of power of energy that’s being expended, a whole bunch of compute capacity that’s being expended, all for the purpose of trying to grab a piece of an expanding Bitcoin pie that to date is really only used for speculation. I think there’s a piece of the future in like Bitcoin and crypto. I don’t personally think the future is Bitcoin and crypto just because of those backwards economics, because in order for it to scale, it would have to consume so much energy and compute capacity that I think it will ultimately become untenable. But with that said, when I first learned about Bitcoin about ten years ago, this is what I thought and it was clearly wrong.

Yeah, I think that’s a largely explored still the crypto. Like I said, I’m not an authority in it, so in the surfaces on it. And I can definitely see the emergence of something really profound happening here. I think it’s sort of 1.0 version. I think the 2.0 will be much more integrated, much more dynamic, much more sustainable model. I don’t know what that looks like. Is it a theorem? Is a Bitcoin? Is it multiple currencies? A friend of mine runs a very large billion dollar fund, and I was talking to him about his fund and whether they’ve got a portion of that fund allocated for crypto, and he just kind of laughed at me. These are very savvy investors and they said, no, the way we see it going and they may be wrong on this one, but the way they see it going is they can’t see that the government or the central banks will allow this decentralization without them having some involvement in it. And they just said that they see that there’ll be some control coming in from those organizations, from those governments that will see the demise of many of those cryptos that are out there at the moment. But who’s to know? I don’t know. Yeah, it’s a discussion that you can go around and round in circles for a long time on, but I think it’s definitely a space to watch out for in the future.

Yeah, I think it’s as they say, definitely interesting times. Well, Tom tell people where they can learn more. Where can we connect with you or is there a website that we can convince you if we want to get some more Tom Cronin.

Yeah, definitely. I can go to tomcronin.com. My Instagram is where I’m probably mostly active as well, which is just Tom Cronin there on Instagram as well.

Got you. All right. Well, Tom, I really appreciate your time and I hope you have a great day.

It’s great to be here. Thanks for inviting me along today.

All right.

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