‘Road to Character’ is thought provoking book

Gratitude is rightly the virtue we think of during Thanksgiving week, and of course there is much for which to be grateful. I want to write about two people for whom I am grateful: Augustine, the fourth century Bishop, and David Brooks, the New York Times columnist and author. In his book published earlier this year, “The Road to Character,” Brooks offers a look into the lives of nine historical figures, including Augustine.

By looking at the character of these people, Brooks helps today’s reader take a look at their own character — a somewhat frightening proposition but certainly worthwhile. The Road to Character is the most impactful book I have read in a long time.

The subjects of the profiles are people like Francis Perkins, who was the Secretary of Labor under Franklin Roosevelt, President Dwight Eisenhower, and George Marshall, the general. There are others, including Augustine, which he writes about in a chapter he names “Ordered Love.”

Brooks writes on page 206 in my hardback edition: “In Augustine’s view, people do not get what they deserve; life would be hellish if they did. Instead people get much more than they deserve.” This little reflection captures so much of Christian belief and the universal moral ethic. We can choose to believe that we have earned everything we have, which would be a very limited view of our blessings, or we can attempt to see all our blessings, which will quickly outnumber any list of personal achievements, accomplishments or accumulation.

One of the main ideas behind the book is that culture has become one of self-promotion, based on the notion that we can find fulfillment by looking within and working individually to make our own happiness. The examples of character which Brooks presents make the argument that we would be much more likely to find fulfillment by making one’s self small, by connecting with others, and by looking outward to find ways to make others happy.

The Road to Character is not about religion but the book’s universal themes are inescapable. Let me share these paragraphs from Brook’s section on
Augustine (page 192):

Augustine’s feelings of fragmentation have its modern corollary in the way many contemporary young people are plagued by a frantic fear of missing out. The world has provided them with a super-abundance of neat things to do. Naturally, they hunger to seize every opportunity and taste every experience. They want to grab all the goodies in front of them. They want to say yes to every product in the grocery store. They are terrified of missing out on anything that looks exciting. But by not renouncing any of them they spread themselves thin. What’s worse, they turn themselves into goodie seekers, greedy for every experience and exclusively focused on self. If you live in this way, you turn into a shrewd tactician, making a series of cautious semi-commitments without really surrendering to some larger purpose. You lose the ability to say a hundred noes for the sake of one overwhelming and fulfilling yes.

Augustine found himself feeling increasingly isolated. If you organize your life around your own wants, other people become objects for the satisfaction of your own desires. Everything is coldly instrumental. Just as a prostitute is rendered into an object for the satisfaction of orgasm, so a professional colleague is rendered into an object for the purpose of career networking, a stranger is rendered into an object for the sake of making a sale, a spouse is turned into an object for the purpose of providing you with love.

I remember John Paul II telling us that the opposite of loving someone is not to hate them but to use them. I guess he got the idea from Augustine. David Brooks does a masterful job of explaining the concept in 21st century language.

In the last chapter of the book, Brooks recalls life’s big questions: “Toward what should I orient my life? Who am I and what is my nature? How do I mold my nature to make it gradually better day by day?” He offers 15 propositions for consideration to the person attempting to answer these questions. There is much good material in these propositions, but here let me offer for your consideration a sentence out of No. 13:

A vocation is not found by looking within and finding your passion. It is found by looking without and asking what life is asking of us.

My business experience gives me knowledge of numerous people who have found professional fulfillment by surveying the landscape, identifying needs and then committing themselves to responding to those needs in a meaningful way. I call these people entrepreneurs, which I have no doubt is a vocation.

Let me close by going back to the chapter on Augustine. Brooks describes what he calls the “Augustine process” (page 208):

It starts with the dive inside to see the vastness of the inner cosmos. The inward dive leads outward, toward an awareness of external truth and God. That leads to humility as one feels small in contrast to the almighty. That leads to a posture of surrender, of self-emptying, as one makes space for God. That opens the way for you to receive God’s grace. That gift arouses an immense feeling of gratitude, a desire to love back, to give back and to delight. That in turn wakens vast energies. Over the centuries many people have been powerfully motivated to delight God. This motivation has been as powerful as the other great motivations, the desire for money, fame, and power.

The genius of this concept is that as people become more dependent on God, their capacity for ambition and action increases. Dependency doesn’t breed passivity; it breeds energy and accomplishment.

If you know an adult who is trying to figure out life, who is open to serious ideas about life’s meaning, you might consider “The Road to Character” as a Christmas gift.

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Encyclical is a call to unity more than critique on energy use

I first heard the term “butterfly effect” some years ago when an economist was explaining how the price of bread in Fargo could be affected by the weather in China. Just as some scientists have speculated that weather patterns in Texas can be affected by the flapping of a butterfly’s wings in Brazil, a loaf of bread in North Dakota can cost more if a sparse wheat harvest in China drives the world price of flour to record highs. Economists learn early on that everything is related, and we can learn by studying those relationships. Furthermore, posits the Catholic Church, we can grow deeper in human fulfillment by studying relationships in reference to a universal central being whom we call God.

Pope Francis emphasizes that everything is related in his recent encyclical, “On Care for our Common Home.” Also called Laudato Si’, this teaching letter was published earlier this year. It’s a 65 page book that many people call a treatise on global warming but it would be a shame to miss the broader message about our relationship with God in this document because we focus too much on language about the importance of renewable energy.

In order to live in peace, we need to understand our relationship to God; and we need to understand that relationship in the context of His creation, the Pope says. If we put God at the center of creation, we can begin to have the right relationships which make peace possible; if we put ourselves at the center of creation, then we are prone to misuse the rest of creation.

In summary, the Pope tells us that all things are connected, and that there is a relationship between humans and nature that God expects us to honor. If we don’t know how to treat each other, then we won’t know how to treat nature. This is the state we find ourselves in and the Pope tries to lay out a corrective path. The fix isn’t so much the adoption of renewable fuels as it is about placing God at the center of our being. Sure, Pope Francis talks about energy conservation (for about 25 percent of the document) but he speaks much more earnestly about getting our relationship right with God (for about 75 percent of the document).

Francis lays it out as early as page two: “The misuse of creation begins when we no longer recognize any higher instance than ourselves.” Much more than asking us to use less energy, the Pope is asking us to consider how we should be living in the first place: “He asks us to replace consumption with sacrifice, greed with generosity, wastefulness with a spirit of sharing, an asceticism which entails learning to give, and not simply to give up. It is a way of loving, of moving gradually away from what I want to what God’s world needs.” My, oh my; that’s a much greater challenge than simply asking us to give up air conditioning.

Laying plain the foundational theology for the encyclical, the Pope says: “The creation accounts in the book of Genesis contain…profound teachings about human existence and its historical reality. They suggest that human life is grounded in three fundamental and closely intertwined relationships: with God, with our neighbor, and with the earth itself.” Pope Francis is inviting us to consider our relationships — and to consider them in the order presented in scripture: God first, our neighbor second and earth third.

The Pope instructs: “Disregard for the duty to cultivate and maintain a proper relationship with my neighbor…ruins my relationship with my own self, with others, with God and with the earth.”…In that same paragraph (70) he says: “Everything is connected…genuine care for our own lives and our relationship with nature is inseparable from fraternity, justice and faithfulness to others.”

The Pope cautions that “the analysis of environmental problems cannot be separated from the analysis of human, family, work-related and urban contexts, nor from how individuals relate to themselves, which leads in turn to how they relate to others and to the environment.”

When the Pope says “every violation of solidarity and civic friendship harms the environment,” he is talking about far more than carbon emissions. He is seeing the term “environment” in an all-encompassing matter.

“Men and women of our postmodern world run the risk of rampant individualism, and many  problems of society are connected with today’s self-centered culture of instant gratification,” he says. I think the media dubbed this a document about climate change because it is much easier to contemplate a world running on renewable energy sources than it is to imagine a world in right relationship with God and neighbor.

Pope Francis raises scientific and political questions throughout this document, but he qualifies: “the Church does not presume to settle scientific questions or to replace politics.” The Church knows its place, but it demands that other social institutions exercise their rightful authority as well, as broadly as is possible but also within their true limits.

The political and economic manifestation of an unbalanced relationship can result in excessive consumerism, and the Pope makes that point. “The emptier a person’s heart is, the more he or she needs things to buy, own and consume…Obsession with a consumerist lifestyle, above all when few people are capable of maintaining it, can only lead to violence and mutual destruction.” This is a far more challenging statement than anything the Pope says about how much fuel we should use. “Purchasing,” he says, “is always a moral and not simply economic act.”

With a selfish attitude, it is impossible to think of those around us, and the nature around us, as we should. “We must regain the conviction that we need one another, that we have a shared responsibility for others and the world, and that being good and decent are worth it.” The Pope is calling us to unity.

The Pope holds out the Trinity as an example (No. 240): “The divine Persons are subsistent relations, and the world, created according to the divine model, is a web of relationships. Creatures tend towards God, and in turn it is proper to every living being to tend towards other things, so that throughout the universe we can find any number of constant and secretly interwoven relationships. This leads us not only to marvel at the manifold connections existing among creatures, but also to discover a key to our own fulfillment. The human person grows more, matures more and is sanctified more to the extent that he or she enters into relationships, going out from themselves to live in communion with God, with others and with all creatures. In this way, they make their own that trinitarian dynamism which God imprinted in them when they were created. Everything is interconnected, and this invites us to develop a spirituality of that global solidarity which flows from the mystery of the Trinity.”


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Open Window Theatre’s Lilies of the Field is an Inspiration

If you’ve ever wondered what a miracle looks like, go see The Lilies of the Field playing at the Open Window Theatre and you’ll see the answer: it looks like Homer Smith.

The downtown Minneapolis theater is presenting a stage adaptation of the William Barrett novel and 1963 movie with Sidney Poitier through May 25. Artistic Director Jeremy Stanbary and director Joy Donley make the most of a minimalist set to create a wonderful night of music and story-telling .

Smith, an African-American Baptist wondering about the country taking day jobs where he pleases, finds himself in the Arizona desert where a group of East German immigrant nuns have set up shop. There is lots of work to be done and Smith agrees to help repair their roof. Mother Maria Marthe, the mother superior, convinces Smith to build the sisters a chapel. Smith agrees, not knowing how the job will ever get done given their lack of resources. Over the course of the play, people in surrounding villages donate the needed supplies and labor, and the chapel gets built. Smith leaves and everyone calls the construction of the chapel a miracle. In the closing scenes, some of the people we meet in the play tell us with great price about their connections to the saint – Homer Smith – who made this happen. 

I like this play for a lot of reasons. First the acting is marvelous: Lamar Jefferson does a great job as Homer Smith. Second, there is some really delightful music by Christopher Erickson. And third, the play’s message really gives the audience something to think about.

The story shows us that one person can do a lot – in this case, a lot more than the person initially himself thinks he can do. It shows us the power of encouragement from someone else. Smith persevered because Mother Maria Marthe believed in him. She is the person who identified Smith as the answer to her prayers, and although Smith resisted that description early on, he eventually accented to that role.

Lilies of the Field shows us that if we are truly being called by God to build something, we should move forward even if we don’t have every detail figured out in advance. This doesn’t mean it will be easy. The nuns in the play lived an austere life, worked hard and prayed hard. There was a little friction at times between Smith and the nuns, and at one point Smith abandoned them and the project. Smith was stubborn and thought he needed to follow his own will. The beauty of the play is the way in which he came around to doing God’s will, at least as the nuns saw it.

Furthermore, I love what came out of that miraculous construction project. The narrator of the play tells us the chapel became the centerpiece of a haven for troubled children who came to the nun’s encampment for rejuvenation. Many other buildings eventually were constructed around the chapel as others took interest in what was going on there. Smith himself moved on so he didn’t see all the good his work led to, but he did what he was called to do. The first phase in any project is often the most difficult.

Lilies of the Field is an encouraging and inspiring story. Watch closely. God may be calling you to be the next Homer Smith.

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Know your strengths

If you work in a small shop like I do, you know you spend most of your time putting out fires – that is, handling day-to-day obligations. It is very difficult for leaders in smaller enterprises to make time for visioning. But instinctively we know it is important. The leader of every company, whether large or small, must set aside time for contemplation. If you don’t take time to visualize the future, you may never see it at all. If you can’t see where you are going, you will never get anywhere.

The most important thing for any leader to know is self. If you don’t know who you are, you will never be able to significantly help anyone, including employees and customers.

A leader doesn’t have to be good at everything but it sure helps if he or she knows his/her strengths and weaknesses. That way, strengths can be leveraged and compensation can be made for weaknesses.

I recently came across a book published by the Gallup organization in 2008 called “Strengths Based Leadership: Great leaders, teams and why people follow,” by Tom Rath and Barry Conchie. Using results from thousands of interviews, the authors explain why it makes sense to invest in your strengths. The book is 266 pages but you only need to read the first 95 pages to get the message.

Each copy of Strengths Based Leadership provides a unique code that gives the reader access to a test-taking web site where your strengths can be identified. The test poses nearly 200 questions, allowing 20 seconds for each response. Questions typically pose two ideas and require the respondent to choose one over the other on a sliding scale.

When you are done, the computer summarizes your responses. My own test results gave me something to think about. Results identified strengths that I expected but they also identified areas where I need to work, some in areas that surprised me. Hmmmm. Maybe that’s why I seem stuck on some projects I have been working on for a long time! These results give me another way to think about these projects.

It’s the middle of March so if you made any New Year’s resolutions, you’ve surely blown them already. But it’s still early enough in the year to set new goals and see results by Christmas. No matter what goals you have for you or your organization, you will have a better chance of arriving at your desired destination if you have a solid understanding of where you are starting from.

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Reflections six years after the financial crisis

It was six years ago that the Federal Reserve and the U.S. Department of the Treasury helped to facilitate the acquisition of Bear Stearns by JP Morgan Chase. The deal was sealed on a Sunday, March 16. JP Morgan Chase bought the bank for $2 per share or about $236 million; 15 months prior the stock market valuation of Bear Stearns was about $20 billion.

Although the mortgage market had started to crumble in 2007, I consider the Bear Stearns event in 2008 to be the beginning of the financial crisis. Several shocking events disrupted the financial markets in the months to come: IndyMac failed in July after comments by Sen. Chuck Schumer triggered a run on the bank, regulators took over Fannie Mae and Freddie Mac in September, Lehman Brothers filed for bankruptcy on Sept. 15, and on Oct. 12 the U.S. Treasury called the heads of nine of the largest financial institutions in for a meeting where Henry Paulson doled out $125 billion.

This sequence of events will be studied by economic historians for decades. Technology and securitization fostered the growth of a global interconnected financial system that outpaced regulatory effectiveness. In fact, our laws, such as the Gramm-Leach-Bliley Act of 1999, only hastened the concentration of assets and made the situation worse. While the FDIC had a fine-tuned system in place for handling small bank failures, the government really didn’t know what to do when the biggest players got in trouble. They made it up as they went along – save Bear Stearns, let Lehman fail – sending all kinds of mixed signals.

The Dodd-Frank Act passed in July 2010 was supposed to codify a procedure for handling the failure of a super-large financial institution. That’s reassuring, although the Washington, D.C.-Wall Street axis remains troubling. Wall Street executives have a long history of putting in stints at Treasury. Jack Lew, the current Treasury Secretary, is a former Citibank employee, which makes me wonder what will happen if Citibank becomes the first institution to test those new big-bank failure proceedings Dodd-Frank gives us. Is it a coincidence that the investment firm to do best during the crisis was Goldman Sachs, Paulson’s former employer? In the end, too-big-to-fail is more a matter of political will than a matter of administrative procedure.

A healthy financial marketplace requires everyone to play by the same rules. We can’t have bureaucrats in Washington, D.C. picking winners and losers. Despite the best intentions of all the elected office-holders and the officials in the various departments and agencies, it just ends up looking like crony capitalism where a select few get special treatment. As a country, we can do better than that.


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What’s your ‘Why’?

I invite you to think about the why behind your business. Running a business, especially these days, is not for the faint of heart. In order to succeed you need to know why you are in it. Simon Sinek has made a name for himself helping people find their why. I encourage you to check out his website and watch his TED talk at www.startwithwhy.com.

The tendency in business is to start with “what,” as in what are we going to do? The next consideration is “how” – how are we going to identify potential customers? And finally, after figuring out what to do and how to do it, you think about why you are doing it.

Often, business owners say they are in business “to make money,” but it’s really more than that. There are a lot of ways to make money but you chose your specific business. Why? Sinek urges people to start with why. He contends that once a person figures out their why, they will have a much clearer sense about how to proceed and what to do.

I know this is true in my own case. At NFR Communications, my business, our why is about strengthening small businesses. I am passionate about this purpose. How do we strengthen small businesses? We do it by working directly with the banking industry. By providing information, ideas and analysis to community bankers, we enable bankers to be more effective small business partners through lending, other financial products, and counsel. The “what” in our case is NorthWestern Financial Review magazine and its accompanying website.

With a clear sense of why, you have a better chance of arriving at an effective answer to “what?” Instead of viewing why as the destination, view it as the engine. You have heard about purpose-driven enterprises; these are run by folks who know what their why is.

A strong sense of why is important because the best customers are those with whom you share a strong sense of mission. When two entities share a mission, they become partners. Relationships — business and otherwise — rooted in a common mission have a much better chance of enduring than relationships based on other factors such as price, convenience or even service.

So what’s your why? If you aren’t sure, take some time to think about it.

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A look at the qualities of success

While economic growth in the United States has been slow since 2008, some businesses have done very well in the last few years. Consider the 250 businesses that are finalists in Ernst & Young’s 2013 Entrepreneur of the Year program. These businesses are expanding, creating jobs and making money.

Last year, Ernst & Young teamed up with the Kaufman Foundation, which is dedicated to promoting entrepreneurship, to survey the leadership of the 2012 finalists. How is it that some managers lead their companies to growth at a time when so many other managers hunkered down, just trying to keep their doors open? The research showed that successful entrepreneurs:

Have a unique perspective on risk. A majority of the entrepreneurs indicate they believe entrepreneurs are born, not made. These folks have a passion for identifying unmet needs in the marketplace and then set out to meet them.

Communicate their vision and instill passion in great teams. These companies overwhelmingly cite people as their leading priority. This is in sharp contrast to well-established global companies, many of which have been more interested in implementing efficiency and productivity increases that translate into headcount reductions.

Demonstrate resilience and rapid recovery. While all businesses make bad decisions from time to time, the best entrepreneurs and their teams seem to bounce back from those mistakes with minimal damage, many even learn from their mistakes and emerge stronger.

Embrace innovation. Established companies tend to resist radical innovation that might displace their existing revenue streams in the short term. Successful entrepreneurs know that their agility and propensity for innovation can make them an attractive investment, acquisition or partnership target.

Do what they do best. High-growth entrepreneurs focus on the things they do best and find partners to handle the technology, administration and anything else outside their expertise.

Preserve what they’ve built. Successful entrepreneurs look to preserve those qualities that made them a market leader. Their top concerns: preserving company culture, attracting and maintaining top talent, protecting and enhancing brand/reputation and retaining best customers.

Has your organization been performing at peak during the last few years? If not, think about these qualities. If they don’t describe your company, what would it take to develop these qualities among at your company?

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Chesterton Academy is response to Kelly’s call-to-action

I have been a fan of Matthew Kelly for a few years. In preparation for a book study group I am going to begin leading at my parish next month, I just finished rereading his best-seller “Rediscover Catholicism: A Spiritual Guide to Living with Passion and Purpose.” This book is the most compelling call-to-action for 21st century Catholics that I have ever read. If you are Catholic and have been away from the church for a while, I encourage you to pick it up and read it.

And you don’t even have to buy the book. The Archdiocese of Saint Paul and Minneapolis is conducting a very ambitious evangelization project around the Rediscover theme. It is giving away tens of thousands of copies of Kelly’s book. Go into almost any Catholic church in the area and you will find free copies of the book available to anyone who wants one. I took an extra one for an out-of-town relative and mailed it to him.

Every chapter in the 320-page paperback is filled with ideas worth contemplation. In this essay, however, I want to focus on chapter 19, entitled “Time for a Change.” Beginning on page 277, it opens Part 4 of the book. I have long had an interest in education, serving on the board of advisors for my parish grade school, and being involved in the founding of Chesterton Academy. Kelly has some exceptional comments to make about the state of education today. Consider these direct quotes from the book:

The Catholic education system as a structure is one of the marvels of world history. It is the cause of envy among countless other groups and organizations. Those with an agenda dream of getting access to a system as powerful as the Catholic education system. Why? Because they realize how powerful it could be if it was actually employed. That’s why it is under attack, and why so many people have forced their agendas upon the Catholic education system. All the while, we have failed to use it for the good it was created to produce in students, families, the Church, and society.

Do we want to teach our children about Jesus, the value of virtue and character, and the beauty of the Church? Or do we just want privileged educational environments to teach them what they need to get into the best colleges? Do we want to prepare them for life? Or do we just want to prepare them to become cogs in the global economic wheel? Do we believe that by teaching them about Jesus and the role the Church can play in their lives we are better preparing them for college and for life? Or have we resigned ourselves to the spirit of the world? Page 283.

The Catholic educational system is perfectly positioned to ignite within the hearts and minds of young Catholics a sense of passion, awe, and hunger for truth. It is critical that we reassess at this juncture what we wish to bestow upon those who attend Catholic schools. If it is simply an elite education for a privileged few, then surely we are in direct conflict with the very Gospel that we claim to be guided by. But if we wish to bestow upon our children the values and beliefs that emerge from the life and teachings of Jesus Christ, then clearly it is time for a change. Page 287.

…It seems to me – and I may be wrong—that the Catholic education system will actualize its potential not by shying away from all things Catholic, but by doing what it claims to do and offering a Catholic education..

…with so many of our Catholic high school students rejecting the faith in high school or shortly after they graduate—and I assure you the percentage is enormous—it is impossible not to question our current approach… Page 288

Matthew Kelly is spot-on with all these remarks, and it is precisely this kind of thinking that led Dale Ahlquist and me to start Chesterton Academy six years ago. The school will be opening next week with more than 100 students; while we are not an official archdiocesan effort, our school incorporates Mass into the daily schedule, every member of our faculty takes an annual oath of fidelity to the magisterium of the Catholic Church, and our entire curriculum is organized and taught around the mystery of the Incarnation.

The school is growing because many parents are asking the very same questions that Kelly asks. As parents, we are responsible for the education of our children. We don’t get a second shot at this. Our children are teenagers only once. As parents, we have to give this our best effort and Chesterton Academy is the fruit of that effort.

Fall is a marvelous time of renewal. As the new school year gets underway, it’s a great time to renew our faith. The Archdiocese of Saint Paul and Minneapolis has given us a magnificent tool in Matthew Kelly’s work. Dig into the book, and then hear him speak at the Archdiocese’s Rediscover event at the River Center in Saint Paul on Oct. 12. Kelly and many other inspirational speakers will offer encouragement for those trying to live their faith.  

 Then, after you’ve studied the book and heard the speakers, think about your life and what you need to do to respond to God’s invitation to come to Him. Live your faith and you, your children and our world will be better off.

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Hire for success

Walter Bond is a former NBA basketball player who speaks to groups about what it takes to succeed on the court and in the office.  When Bond played college ball at the University of Minnesota, he won the most improved player award four seasons in a row. Successful people, he said, always seek improvement.  “Average people are okay being average, but successful people what to improve,” he told a group of Iowa bankers last summer.

I pulled out my notes from his talk to an Iowa business group last summer because it struck me that it has never been more important to hire the right people. Bond’s comments offer insight into who those people might be.

Improvement means change, so a successful person is someone who is willing to change. “Is your organization becoming obsolete because everything around you is changing and you’re not?” he asked.

Successful people also pay attention to detail, and they are confident. They don’t complain. Too many people like to throw themselves a “pity party,” Bond said. “Ninety percent of life is pretty good, yet too many folks focus on the 10 percent that is negative.”

Bond challenged each member of his audience to consider whether they are likeable. “People want to be around people they like, so do people like you?” he asked. “If someone likes you and you screw up they are likely to give you another chance. If they don’t like you they will walk away.”

Likeable people brighten up a room. Bond said his college coach Clem Haskins could brighten up a room. Recalling the recruiting visit Haskins made to Bond’s family home, Bond stressed that the most important evaluation points in a new relationship occur the first time someone sees you and the first time they hear you speak.  Smiling and making eye contact, Haskins made a good impression, he said.

Bond said any office wants people who smile and make eye contact. Those skills help a person not only to communicate but to actually connect. Deals get done when people connect.

At 6-foot-5, Bond is short by NBA standards but he carved out a niche for himself as the top sixth man in the country. He always dreamed of being a starter but found he was best suited to come off the bench. He made the most of his niche, which lasted eight years in pro basketball. He urged bankers to find their niche and make the most of it.

Hiring the right people is never easy but Bond’s comments give us a little better idea of what to look for.

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Note to Minnesota lawmakers: Business-to-business tax proposal should be dropped

As the legislature considers a variety of tax reform options, I urge lawmakers to reject the implementation of a business-to-business sales tax.

In his tax reform proposal, Gov. Dayton advocates for a reduction in the state sales tax rate but a broadening of the sales tax base, including a new business-to-business tax. If additional state revenue is truly necessary, I urge the Governor and lawmakers to focus on the income tax. A business-to-business sales tax is both regressive and opaque, making it an objectionable option for tax reform.

As the sole owner of a small publishing company dependent upon advertising revenue, I quickly calculated the impact of the proposed 5.5 percent tax on advertising, one of the business-to-business services targeted in the Governor’s proposal. The amount would be about 16 percent of my company’s net income, on top of the income tax I already pay.

Advocates for the tax will argue that I should be able to pass that sales tax cost onto the purchaser. While that may have been possible in the pre-financial crisis environment, I can assure you that is not possible today. My business competes with publications based in surrounding states; these competitors can offer ad rates free of sales tax. If I want to compete, I have to respond to the market; ad buyers already negotiate hard and there simply is not 5.5 percent leeway in those negotiations. Implementation of the tax will mean customers will buy less or I will have to pay the tax.

Painfully, I will be required to pay for this tax regardless of my net income. Even in years when things are slow, I will be subject to the tax. Although I am not a fan of paying taxes I am willing to pay my fair share according to my earnings. An income tax has the semblance of progressivity; this business-to-business tax approach ignores ability to pay, making it regressive.

If the argument is made that all sellers of business services can pass the tax along, the obligation to pay the tax ultimately hits the working consumer. There is no place for the average citizen to pass along the tax. He or she is stuck with it in the form of more expensive goods and services. And again, the obligation applies regardless of ability to pay, making it unacceptably regressive.

Furthermore, it will be very difficult for consumers to determine what portion of the purchase price is the result of taxation. As vendor after vendor in the supply chain build in new layers of tax, the consumer will be hard pressed to discern what portion of the purchase price reflects the cost of the product and what portion represents taxation. That kind of opacity also is unacceptable.

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