Simon Nynens on How to Fail Less

fail less? He joins us, Now tell me how I can fail less? Simon at nineans is chief executive officer and chairman of Wayside Technology Group in Eatontown, New Jersey. He joins us here at the Renaissance Hotel Street in New York City. Simon, how can I fail us? Pleasure to be here? How we feel less? Preferably by failing a lot early on in life? And you fail a lot, but when it doesn't matter, when it doesn't matter, so you should practice a lot, fail a lot and get

better every single time. Usually when you have a first activity, you're not that good at it. So tell me the time that you failed early, that you think is a sort of a lynch pin for your success. Well, we looked at it. I came to this acquisition. I worked for an auditing firm and they hired me Ernstain. I used to work for Instain Young and they bought this company and said, you don't have a treasury company, you don't have a holding company. UM, so why would you

you know you need that? And they said, well, if you know everything, why did you come do it? For? As I was from Amsterdam, the Americans came in and I said, sure, I'll come join you, and they sent me to Paris and the numbers looked really good. But when I joined them in Paris that it was apparent that it was a big mess. So there you go. Failed. Didn't do my homework before I joined UM, but we did, and I went with a lot of youthful enthusiasm and

tried to fix it and did that. And then they got me to the US here and it became apparent when I came here that we really have to sell the European operations. So I went back to try to sell the European operations. UM failed a lot there too. You gets a lot of frogs and then finally you get to do that success. There's a difference between failing and taking risk. Though it sounds like he took risks and perhaps you know, went into it without doing as

much homework, but can you. I mean, it seems like it is part of the issue that to be a good leader, especially early on, you have to take risks and you have to try to do the impossible. Is that what you're really going after here? Yeah, it's all calculated risks, right, But there are three ways to lead. One is with a fist. Right when we were living in the cave and you didn't do what I said, I smack you. You gotta do it like it's parenting, right, you you and my child do what I say. And

then there's the third. The second one is um money, I pay you money. You're management tensill over think people are corn operated machines. And then the third one is really motivation. What really makes you take Why are you choosing a professional? Really drives you in your life? And I've noticed that as soon as you focus on the third one, yes, you can fail their calculate risks, but you love what you do and you do for the right reason. So, um, that's basically what I want to

talk about. How do you implement that in your business and wayside? So in our company, I grew up under fear. And well, it's funny when I do these talks and I asked people, do you have a bad leader, The first thing that comes to mind is always that one bad leader who stood out, and usually it's the violence person. And it's not just physical violence, it's also psychological warfare. Right when you walk into that office, you've got to come all guarded. You're like, oh my god, I'm gonna

go in, I'm gonna get yelled at. I hated it. I hated it, this public humiliation when you did something wrong and that leader came in and it's your fault and look showing off. I call it PEAKR behavior, like you know, you're my victim and I show the rest of how strong I am. Um. So I hated that, and I said, there's only there's only two ways, um, you can lead. It is by motivation or by fear. So I chose motivation. And so in our office, I

asked people what really drives you? And they said, it would be great if we can work from home normally people work only from home. We've done senior positions. I turned that around and I said, everybody can work from home. We started with one day, we're now up to three days. You can come in if you want to for the camaraderie and and and talk. And our office are beautiful. Um people like in silence, people like to be loud. We had them next to each other. Didn't work out well.

So now we have half her office. Nobody has a desk anymore. I don't have a desk. Half two people can work in outside. Half two people work in what we call the cockpit. It's a quiet zone and you don't talk. People like to work at cubicles. People like to work in private offices. People like to work in a collaboration room. So build all of it. Don't force people in cubicles, but also don't force him in this open room or in private offices. Do what they want.

And some people like to work in the Starbucks cafe setting, so we build a We build a cafe Starbucks kind of like we have a outdoor deck. You can work. But the point of the matter is what really matters interviews is that we sell software. It doesn't matter that you know, I had a manager coming in. She came in late today and it was horrible. So I made her state in our extra so what do we in kindergarten? Is? This is this high school? What are you doing? Well?

She came in late, so I said, why don't we have a conversation with her? You know, underpinning all of this is this feeling that it isn't that easy to recruit and retain quality workers right now? Have you found have you found that has it been difficult for you? Not with the retention necessarily because it sounds like people are very happy with this, but as far as when you go out and look to replace somebody, is it difficult for you? Yeah? I mean we're in Eaton Town,

New Jersey, right, We're not in New York. Uh, So what do we do out there? You know, you really create a family atmosphere. People want to work with us. Our average tenure is much longer than our competition, and I believe in that. I believe paying a fair wage and really involving people. But more than that, we have a banner above the door that says did today really matter?

And I actively when in the beginning, when I took over and worked my way up and two thousand and six I started as European controller, then became worldwide controller and a CFO and executive vice president. And when I became CEO, the first thing I told people is like, if you're unhappy, you got to come to me. And they said, yeah, here's the European guy that that's going to be helping me finding a new job. If I'm happy in my job, I said absolutely well, and but

don't tell your manager. If you feel uncomfortable about it, come to me. Now, why would I do that? I did that because unhappy people effect on average like eight people around him. And we all know that you all have that unhappy person at work, and it's like, oh, we had a great speech, and then after us, oh, it's all bus with that is bad. I don't believe them. We're gonna go. It's terrible. Um. So I helped a couple of people find that other job. And you know

what they did. They went to that other company. They were happy and they said this guy was crazy, but buy your software there. That's a win win. Simon Ninans, thank you so much for joining us. Simon Ninans is chief executive officer and chairman of the Wayside Technology Group based in Eaton Town, New Jersey, with treadmills for the desks. This is Bloomberg. Right now, we are going to take a look at the October jobs report. Ward McCarthy joins

US now. Ward McCarthy is the chief financial economist for Jeffreyes. The numbers came out, they were slightly disappointing, and US added two hundred and sixty one jobs, lesson people expected. But really it's the wages that they didn't grow at all, and they had been expected to grow. Word, what was your first take of this report? Well, the the labor blanket data continues to reflect some of the consequences of

the hurricane. Last months, the payerial numbers were really weak because of the hurricane, while the household survey was strong and this month that clip plopped. And as you pointed out, the weakest aspect really of all of this data was the fact that average hourly earnings were unchanged and they've been just very volatile in recent months. And to the prior three months, average hourly earnings had risen five tenths of one per cent. And I think that in September

and October some compositional issues played a big factor. For example, the low paying food service and drinking establishment pay rolls fell ninety eight thousand in September and they also popped eighty nine thousand in October. So uh, the decline in September boosted wage measures, while their rise this month UH suppressed wage measures. So I think we really have to see the November data and maybe even wait to see the Deceamberge data before we can really get our hands around,

uh whether or not the labor market has changed. So uh, you know, I know we have a sense of what the Janet yell and Photo Reserve would look would look at in these jobs supports. What's Jerome Powell going to be looking at next year, because we granted the data right now is pretty muddy, is still kind of being influenced by the hurricanes. But next year, what's he going to be looking for in order to determine whether the

high rates three times two times or not at all? Oh, I think he'll be looking at the same thing that Jenny Ellen has been looking at and that other members of the f O m C have been focused on, and that is, you know, what is really happening with the underlying inflation measures in the US. Uh, inflation has been, you know, a gone through a series of stops and starts over the course of this cycle. And this year, of course, inflation measures have been somewhat on the soft side.

So I don't think that's going to change with with Powell being at the HELM. I think that uh, you know, they're the Fed is pretty happy with what's been happening in the labor market. Uh, They're still pretty confused and not completely comfortable with what's happening on the inflation side. I'm struck by the tax reform bill that we got yesterday. A lot of people were waiting for this to sort of ignite growth, some sort of fiscal stimulus. We haven't

hearned anything about infrastructure spending. But yesterday the GOP released their tax bill and yields fell upon prices rose, Expectations for growth seemed to diminish if you look at the narrowing yield curve. Why is that? Well? I think this was another one of those by the rumors sell the news types of stories. Uh, And quite frankly, with a lot of the information that came out on tax reform yesterday was a little bit um, I think conflicted and

and confusing. On the corporate side, I think they pretty much nailed it, uh. And the corporate tax reform is much needed and will help make the US economy UH much more competitive in the globalized world. So that was for the most proud, I think pretty good news on the end of visual tax size and the changes UM make it really difficult to assess, UM because the consequences

are very different UH for different types of people. UH. If indeed, and this appears to be the case, that there is going to be a meaningful tax cut for uh most middle class individuals, then that should help growth because it gives UH the people who are most likely to spend it more income to spend. But it also causes some problems in areas where already have problems, specifically with the handling of mortgage deductions and also state local taxes.

Because of demographics, some of the higher UM priced existing homes having a difficult time selling and um uh these and and that's especially true in some of the high tax states, and yesterday's tax reform is really only going to exacerbate that problem. It also will increase the federal deficit by one and a half trillion dollars. At least that's the estimate, not including any extra income from faster growth. I do wonder though, what that means for the U. S.

Treasury Department. Does that mean that they're going to have to start issuing longer dated bonds in order to finance themselves. Well, I think the answer to that question is yes, um, both because, uh, you know, if this tax reform goes through, the size of the deficits it's going to increase, as you pointed out, by as much as one and a

half trillion. But in addition, the Fed has started to shrink its balance sheet and the Treasury securities that it rolls off its balance sheet um does have to be financed by the Treasury. So, uh, it may it's not going to be a seventeen event, but yes, in eighteen and beyond, we are going to see the Treasury issue more longer term debt simply because the government seems intent to and digging itself into a deeper fiscal hole. Well, what's your sense about what that will do to yields?

I mean, I would guess that as the deficit deepens and the US sells moren't debt, that would mean that borrowing costs go up. I mean, that's the logic, especially if the Federal Service also unwinding its balance sheet. How how could that not play out that way? Well, I tend to agree with you, and I think that is how we'll play out. But it's it's a very slow moving process. With the FED beginning to shrink its balance sheet. It's the beginning of the end of the control that

central bank balance sheets have over the bond market. And that's the normalization process. And as the normalization process persists, uh, that should cause rates to you know, um, move somewhat higher over a period of time. Uh. And that's both from the balance sheet and the FED and all the central banks raising short term rates as well. And all of this is a natural process of the US economy showing strength and resilience, um, you know, many years now

since our after the financial crisis. So I'm just curious because as I listened to it all makes sense, and I'm not in an agreement. I'm thinking, all right, throw on wanting their balance sheets. The US is going deeper into deficit, it should lead to higher yields. And yet the logic that seemed to guide markets in the past seems to be missing these days. The FETE is actually raising rates. Um, do you think this time is different? Well,

it's I'm not sure what you mean by this time different. Well, the yields will actually rise. Well yeah, I think that. Well, this time, I wouldn't say is different. I think that what's happening is we're returning to a normal cycle. Has been the last nine years that have been different, and they've been different because of the youth of central bank

balance sheets to influence the financial markets. And as this a central bank balancing influence over the financial markets, uh is a gradually eroded, then the financial markets will return towards normal and that will give us more normal cyclical behavior both our interest rates in the stock market. How high can tenure yields go before they send the US

economy and to another recession? Well, I think that, Uh, you need to see interest rates substantially higher from where they are now to cause the US economy to go into recession. And I think short term rates would have to be as much as three hundred basis points higher than this. The tenure yield probably somewhere around two hundred basis points higher. So, in other words, of tenure yields were about a little over four percent. That would be

enough to send the US into a session. Well, not necessarily, but I would that's the yield levels of of that magnitude, UM, I think would be uh, you know, cause yellow flags. Anyway, here to talk more about the tax plan and some of what Gary Khne was talking about as Dave Springsteen, partner and head of the tax department at with Them, were also joined by Tony Anita, the tax partner for with Them in Colorado. Dave, I want to start with you.

One thing that Gary Cohen said was that people do not buy a house based on the deduction that they get from their taxes with respect to their interest payments. Is that true? I think it's a motivating factor that people buy homes invest a little higher than their means because they get an interest tax deduction, they get a real estate tax deduction. So, you know, I take a different view. Maybe there's a level of taxpayers that don't

need the interest deduction, but more stuffus do. So Tony, just have you been I'm sure, spending pretty much every waking hour since yesterday morning trying to pass through this report the plan? Um, do you think that it will

materially change the outlook for smaller businesses for the positive. Well, I think the answer to that really hinges on how you to find small business You know, it's funny when this proposal first came out, you know, I I get inundated with emails from lobbying groups just because I write

about tax law for Forbes. And the first two emails that came into my box, the first one said, uh, Trump tax proposal doesn't House tax proposal does nothing for small businesses, and the second one says, House tax proposal great for small businesses. Depends on how you find small businesses because the idea of a rate for flow throughs is all well and good, but the reality is people under current law up to two fifty dollars of income

are already paying tax at rate. So who's really benefit tends to be on the higher end of the income scale. So it tends to be the people that are paying thirty nine point six under current law that suddenly get a drop in the rate. And that's where the real windfall is. And so small businesses, that depends how you know, if you're making three a year from your business, is really necessarily a small business for some it maybe for others it may not. Well, David, who is getting the windfall?

Because I've also been reading reports that the big conglomerates, the international companies like Ge and Apple, will as we've been hearing, basically been be taxed more on the cash that they hold and will be facing other levees that they currently aren't that they could actually end up with a higher tax rate after this is implemented than they face now. Yeah, I guess the scorecard on winners and losers just yet to come. The guys down scoring the

tax lell change. They only have limited amount of information to deal with this. But at the end of the day, corporate rates are going down, but we don't know how much corporate taxes. Well, but I'll let me push back on that a little bit because now people we talk about a very high tax rate, No big company pays that rate exactly that That was my point absolutely, so

we had had a discussion about that before that. Even though there's a thirty corporate rate, how many companies are actually paying at that rate with all the incentives and the off shoring. So we'll see, Tony. One thing that has loomed large certainly in the credit world is that for highly indebted companies, they will not be able to deduct all of their interest. This could potentially, frankly, I mean life or death for some of the smaller, more

levered companies. I mean you think about the Toys r US for example, they would have probably gone into bankruptcy earlier if they couldn't deduct as much of their interest as they could. What are you hearing about that? Well, the proposal we saw yesterday builds in a safeguard, so any company with average re seats in less than twenty five million is not going to be subject to the interest limitation. But yeah, any anybody beyond that. What they're

trying to do, um, it's really kind of threefold. I mean, number one, that need a way to pay for these corporate tax cuts, right, so you raise some additional revenue by the denying deduction for interest expense. Uh. Number Two, you're trying to shift the dependency on debt away and have more infusion of capital rather than loans into corporations.

And then three you're simplifying the tax law a bit because you no longer have incentive to set up a foreign affiliate loan money to the US and then strip earnings out by paying interest to a tax in different countries. And so they're going to move forward with this, at

least that's what they're saying at this point. It was certainly in the proposal yesterday, and again it's it's a key part of paying for these huge corporate tax rate reductions, because the rate reduction a loan from thirty is at one point eight trillion dollar tax cut over ten years, and the maximum size of all of these cuts, business, individual, foreign what have you can only top out at one point five trillions. So you've got to come up with pay for us. Dave, our company is going to be

filing their tax on postcards. I doubt it's what about individuals? There may be a few that will go the postcard route, but right now we have a lot of those anyway. Really okay, Well, I'm just wondering from your perspective, this bill gets dropped. It's November. They're looking to pass this by the end of the year. They want to implement it as quickly as possible because I need delay. Uh, sort of pushes back any potential growth that could come

from this. How do you guys deal with that? Day We're gonna be spending a lot of hours dissecting the rules, watching the changes. At the end of the day, we also need to be aware of the regulations that will follow these rules, because it may be beneficial on paper in the basic code, but once the legs are done, it could look completely different. So being aware and that makes those business decisions with our clients is gonna be very important, Tony. And just from your experience, how much

can we read into what we're seeing now? I mean, whenever I speak to somebody that they're saying, you know, this is an opening salvo. What in this bill sort of gets your attention as being a non negotia, a bull point that will not change. Well, you know, if you believe President Trump, you know that corporate rate is not going to budge, you know, one percent higher than UM. I think that's a part of his kind of the pillar of his presidency, which is just convinced corporations to

invest in Michigan instead of Mexico. And so I don't think you're going to see that change. I think what's really gonna be at the center of any negotiations are the pay force. You know, I think the rates are

pretty much set where they're going to be. It's just now everyone's going to hash out as you said, you know, um special interest groups coming up and say no, we need our mortgage interest deduction, we need our full real estate tax deduction, we need deductions for state and local income taxes, and then the banks are gonna not be pleased at business is losing interests, expense deductions, and that's

where the battle is going to be waged. And the pay force when you do tax reform, cutting rates is the easy part, right, it's paying for those rate cuts that proved problematic. And I don't think this scenario is going to be any different. Use assiliation of votes forces, tax cuts just coming. Have you guys just been getting a flood of calls, look coming in, look coming in frantic.

Oh my god, this changes my entire business. Thank you so much for joining us, as well as for hosting as David Springsteen partner ahead of the Tax Department at with him, as well as Tony and Nitty tax partner for with them in Colorado. And they both are here at wham's fifth Annual Global Summit in New York City. They probably had planned to talk about other things, but today it is all tax plan, all the time. Thanks

for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm on Twitter at pim Fox. I'm on Twitter at Lisa Abramo wits one. Before the podcast, you can always catch us worldwide on Bloomberg Radio