From the sound alone, one would think that an ocean had lapped up against Union Station’s famed north waiting room. Such was the rush of sound awaiting late arrivals for breakfast on a chilly late fall morning. The reality, however, was more prosaic. In fact, the unique acoustics of the massive chamber had transformed the voices of some 600-plus business people, disproportionately male, into an indecipherable wall of noise.
The crowd had gathered to hear a presentation by two of the nation’s more savvy business executives, Steve Forbes, the chairman and CEO of Forbes Media and editor-in-chief of Forbes, and John Schlifske, Northwestern Mutual’s chairman and CEO. They would not be disappointed.
Kansas City was stop four in the six-city Northwestern Mutual “Two Pillars of the Finan-cial World” tour for Forbes and Schlifske, who shared their strategies for success “in the post-recession environment.” Ingram’s Publisher Joe Sweeney and I had the pleasure of sharing the head table with the pair and, even more usefully, had an hour to interview them the evening before.
Forbes told us he saw the tour as an opportunity to share what he called “value-added information” with more than 3,000 business people across the country. He and Schlifske have had a synergistic business relationship for some years. Bringing the two brands together in a forum such as the Union Station breakfast, Schlifske observed, “adds a bit of a halo effect.”
In our conversation, John Schlifske was careful to distinguish the “aggressive conservatism” of Northwestern Mutual’s investment strategy and the strategy he would recommend for individuals. “The reason we can be aggressive,” said Schlifske, “is because we are so strong.”
That much said, the company maintains contingency plans for successive downturns, explained Schlifske. Management does this not because it expects a double-dip recession, but because it has the responsibility to share-holders and clients to remain strong regardless of the external environment.
In the past few years, Northwestern Mutual has proved to be as smart as it is strong. “We never made the mistake of thinking that structure eliminates risk,” said Schlifske. The company avoided the sophisticated financial instruments that promised to take the risk out of subprime loans and retained its Triple-A rating throughout the 2008 financial-system meltdown and beyond.
An institution more than 150 years old, like Northwestern Mutual, is on “a journey in perpetuity,” said Schlifske. There is no end game. The individual investor, however, inevitably has an exit strategy.
In the current environment, Schlifske and Forbes agreed on the need to make managing risk the top priority for the non-institutional investor. The recovery is real, they argued, but also real slow. Forbes, in fact, called it “feeble.” He attributed the recovery’s languid pace to the fiscal and monetary impediments thrown up by government, as well as by widespread uncertainty about regulation.
Forbes believes that the Dodd-Frank Wall Street Reform and Consumer Protection Act, which passed in July, only aggravated the uncertainty by leaving much of the actual rulemaking to the administrative urchins who lurk in the bureaucracy.
Forbes also contends that the bill did nothing to address the “too big to fail” thinking that pervades both Wall Street and Washington’s Beltway. In his ideal scenario, the investment house of Bear Stearns would have been allowed to fail when it faltered in March 2008. This would have sent a message up and down Wall Street that there was “no free ride.”
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