Random Thoughts – Randocity!

To answer this question, we need to delve a little deeper. Note, I am neither condoning nor praising Obama’s handling of his regulatory efforts. However, I would like to point out certain corrections that do need to be made.

“The truth is that not even the Franklin Roosevelt administration was as hostile to and ignorant about free enterprise as this [Obama’s] administration is.”
–Steve Forbes.

But, is Obama really hostile towards business? Or, is he making needed corrections? There is a fine line here. This issue also points out a serious problem in politics today. That problem is, you guessed it, money. Without money, the world doesn’t work. Without money, candidates don’t get elected. Without money, businesses don’t sell things and make money. Back up the train.. Businesses make plenty of money without governmental help. The trouble is that businesses want to be able to make laws that enable their businesses to make more money and then have the government be lenient with them when issues arise.

The reality, though, is that like the separation of church and state, the government now needs separation of business and state. The two are oil and water, they don’t mix. Government needs to be able to make law without interference from any party. But, businesses have deep pockets and hefty lawyers. These two elements help elect officials and help sway these same officials into making good on promises they made towards these businesses during the election.

Obama’s corrections

While I don’t agree with every single thing Obama has done, I do agree that change is necessary. The change that he is making is intended to correct the issues that led to the economic downturn. The trouble comes with statements from people like Steve Forbes. Mr. Forbes believes that he is the end-all-be-all-know-it-all when it comes to all-things-business. The trouble is, he doesn’t. Yes, he runs a successful magazine, but that doesn’t make him an authority. That makes him a successful business owner.

Obama is walking that fine line. A fine line that shouldn’t even be necessary. But, there it is. The line that’s there to help Obama help the economy, help spur business and growth and reduce the chances of a repeated failure. At the same time, the line is there to show that government values business, but isn’t there to socialize it. The trouble is, this economic downturn was of our own making. By our, I mean Wall Street. The housing bubble was just that, a bubble. Bubbles eventually burst and this bubble was no exception. It’s not as if analysts and intelligent minded people couldn’t see the handwriting on the wall. When the mortgage interest rates got down to 1% and all of those ARM and specialty loans were being issued like water flowing down the Mississippi, trouble was inevitable. We just didn’t know that banks and insurance companies were tying their financial soundness to these extremely risky loans using credit default swaps.

Until the bubble burst, no one really knew just how deep the rabbit hole went. Then, everything came crashing down and all of the nasty subprime mortgage and credit default swap issues came into view in their all fugly detailed glory. The first evidence of that was Bear Stearns followed by AIG (and the subsequent governmental bailout). I still think they should have let AIG fold, I digress.

Government and Business

It’s high time that government distanced itself from corporate businesses. It’s high time congress made laws to separate government from business (including political support). It’s high time that government stopped being a pawn for corporate businesses. Forbes clearly seems to think that Free Enterprise requires socialism to function. Free Enterprise is not part of and does not need socialism. Free Enterprise means that businesses can do whatever they need to do (within the limits of the laws) to make their business succeed. Clearly, there have not been laws enabled that have dramatically impacted Free Enterprise. The laws that have been enacted have been placed there to prevent corporations from producing risky investment vehicles with a high likelyhood of crashing down again. If businesses are now floundering, it’s not because of laws. It’s because corporations have lost their way and are still expecting handouts. Well, you can keep your hand out, but don’t expect the government to be dropping any coin in it.

Corporations have relied, no… depended on the US Government for handouts. That time needs to end. Subsidies for business need to go away. Businesses need to fend for themselves just like Free Enterprise mandates. If a business can’t make it on its own, then let it fail. I’ll repeat, LET IT FAIL. Failure is also part of Free Enterprise. Businesses that will succeed, will succeed because they produce a good product or service. Businesses that fail, will fail because they don’t produce good products or services.

Lost our way

America, and specifically corporate enterprises, have lost their way. For far too long have big corporations depended on favorable governmental conditions (sounds like a weather report) to help them stay in business. Well, that train has left (and must leave). It should be solely up to you and your business practices alone to make or break your company. It is the quality of your products, services and support that makes people want to buy your products or invest in your company. Nothing has changed about this aspect of Free Enterprise.

We need to go back to a time when quality was the key. When providing a superior product was the answer to getting people to buy things. If that also means deflation, then so be it. Businesses need to find their way by learning how to do more with less. How to manage their staff better and stop over-hiring. At the same time, many of them need to stop under-hiring and also value the employees that they have right now.

The key to keeping your business flowing is by keeping your employees active, productive and happy. Morale is a big problem in companies during any downturn. Once fear sets in over the next reduction in force (RIF), then morale falls to all-time-lows. No, taking the employees on an outing doesn’t boost morale. The way to boost morale is to stop RIFing the staff out the door. Yes, I know it gives a temporary boost to the stock price and makes the shareholders happy, but that’s a temporary fix with limited effects. Once the dust settles, the employees who are left become disgruntled, unhappy and produce less. This is completely backwards thinking. Which is why business has lost its way.

Shareholder value vs quality products

I know, someone’s going to say that it is all about ‘shareholder value’. That may be the way things seem now, but it is wrong. Currently accepted actions that lead to improved shareholder value tend to undercut production, stifle innovation, reduce profit margins and lower productivity. Why would you intentionally do this to your business? So, while these measures may seem to help the stock price, it does nothing to help the company improve its quality of products and services. In fact, in the long run, these actions almost always negatively impact the bottom line. So, the fundamental question is, are you in business to make the shareholders happy or are you in business to sell quality products and services? This fundamental question must be answered.

The true answer to this question also shows that Free Enterprise priorities today are all wrong. It used to be that the customer is #1. Now, shareholders are #1 and customers are #2. This is both wrong and stupid. Until businesses go back to the idea that the customer is #1, corporations will continue to fail and need governmental subsidies. While shareholders are considered #1, there is really no such thing as Free Enterprise when it comes to multi-million dollar corporations… which is why they always need a handout from the government.