What positive steps can we take? The energy that is now expended by well intentioned, freedom-seeking individuals on the destructive course of politics can be turned into powerful steps that will have a positive effect on the future. All are moral, right and just. None require aggressing. Consider the following...
The first principle in dealing with government is: Don't be awed by it. What little the government achieves is almost always due to the voluntary participation of its citizens. Those who don't want to help the government can go their own ways without running into much trouble.
“It is difficult to make predictions, especially about the future,” says a proverb often attributed to Yogi Berra. Imagine the world of freedom, or lack of it. Who could foresee the technologies that make our lives so rewarding and convenient? The same technologies have us all under the government’s giant microscope. Thankfully, the brave have turned the microscope around.
The east coast and parts of the southern U.S. were to varying degrees paralyzed by blizzards a few weeks ago. The snow as expected rendered the roads treacherous, and in anticipation of slick streets, shoppers flocked to the grocery stores in advance.The rush into grocery stores, and its aftermath, offers worthwhile lessons in economics.First up, […]
The faces of the Detroit bankruptcy are the thousands of pensioners whose promised benefits are suddenly part of the restructure negotiation. When Motown filed for Chapter 9 last July, the city had $11.5 billion in unsecured liabilities. The vast majority of this was pension and health care benefits owed to retired city employees.The images of […]
“Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.”As the inequality gap grows, there is an ideological battle unfolding in the West.On the one hand, there are those who think government can fix things. It must do more, tax more, […]
What do 8 of the 10 wealthiest people in the U.S. have in common?Aside from being able to fly in private jets, the common thread is that each of them has made their fortune thanks to a start-up.Let me explain…From tech titans like Bill Gates and Larry Ellison (founders of Microsoft and Oracle, respectively), to […]
In December of last year, I left my career to travel the world for one year.My plan was to visit as many countries as possible on my Star Alliance Around-the-World ticket in the first nine months, then, for the remaining three months, return back to the country that most caught my eye and my curiosity.Nine […]
“Tea. Earl Grey. Hot.”When Capt. Jean-Luc Picard wants a steaming beverage in his ready room aboard the starship Enterprise, he just utters those words. The ship’s “replicator” then assembles the necessary atoms — including those for the cup — and produces it, ready for the drinking. Picard thinks nothing of it — it’s hardly more […]
As much as I love technology, part of me hates being so dependent on a live wall plug wherever I go. You find yourself trapped in some setting without accessible wall plugs and your phone is dying. You charge from you laptop, but that is dying too. You take recourse to your tablet, but that […]
For the last 18 months, we’ve been wrestling with a conundrum: How is it that the U.S. energy industry is unlocking vast new stores of oil and gas… and the U.S. biotech industry is discovering how to turn back our biological clocks… at the same time Washington is setting new debt records and Wall Street […]
“What are you complaining about all the time?” people sometimes ask me. “I’m just about as free as I want to be.”Here’s the problem. How can we really know what we want if we’ve never had it before? The less free we are, the less we know what freedom feels like and how it shapes […]
I’ve noticed a trend with the writings of Chris Anderson, former editor of Wired magazine and the author of a new book on 3-D printing called Makers: The New Industrial Revolution.It goes like this. He comes out with a book, and the highbrow experts say it’s crazy, that this time he has gone too far. […]
Two years ago, I spoke to a gentlemen who had started and sold four companies. He was currently working on a new project that sounded very promising (for all I know, he has already sold that one too). We had just heard a talk in which the speaker told people that the whole key to […]
A contributing factor in the rise of Internet commerce, a feature that gave it a kick-start, was that you didn’t have to pay sales tax on what you purchased out of state. Ah, the glory days of the 2000s, when you could order anything and, for once in your life, not get hammered by the […]
Why is business so often scapegoated for all the problems of society?The term scapegoat comes from the Bible and refers to the goat cast out of the community as part of a purification ritual. Perhaps when people saw that lonely goat walk away and probably into its death, it made them feel better about themselves.Weird, […]
In 1881, Dakota Territory had never sold a bushel of wheat to anybody outside of Dakota. Six years later, it sold 62 million bushels. What happened?I recently read Garet Garrett’s The American Story, which came out in 1955. It is a well-written history of America, unusual because of its emphasis on the powerful economics that […]
For young people facing terrible job prospects and a generally bad economic environment going forward, starting a business sounds very appealing. It has advantages over embedding yourself in a big institution, taking your wages in forms of benefits, and hoping (against hope) to climb the ladder.It’s never been easier to strike out on your own, […]
There’s a jewelry store in town with a long tradition, a devoted client list, and a good record of solid profitability. But during the last year, it’s moved around like the “oldest established permanently floating crap game” from the musical Guys and Dolls.It was downtown. Then it was not. It was reestablished on the other […]
Oh how everyone (of a certain class and income) makes fun of the Twinkie, the ultimate symbol of modern food decadence and phoniness. I don’t get it. Have the critics ever tried one? They are so appealing and delicious: light, spongy, sweet, and creamy, all in a tiny package.The news that the parent company Hostess […]
I was strolling along the wharf in Bodrum, Turkey, and I was intrigued to see some natural sea sponges on a table with a merchant behind the table telling me something about them in Turkish.I vaguely recall seeing an item like this when I was a kid but I long ago dismissed them as some […]
My neighborhood is filling up with political yard signs. Vote for this guy! Vote for that guy!I can’t understand why people are willing to give up precious real estate on their front lawns, make friends mad at them, and put their own credibility on the line to back some politico who will certainly betray them […]
The web is packed with some of the greatest educational material on entrepreneurship and enterprise, material that didn’t exist a decade ago and is now within the mouse-click reach of vast swaths of humanity. Are we taking advantage of it?Doug French and I set out to collect the top 15 videos on entrepreneurship — a […]
It’s fashionable to put down commercial culture, but, when you think about it, this makes no sense. Commerce is the driving force of human progress, in more ways that we often realize. Americans in the 19th century knew this and celebrated this. Our commercial culture was a source of pride and the envy of the […]
What’s great about POM Wonderful? Sure, this pomegranate juice tastes great. POM is one of the few drinks that seems to have the same scrunch-up-your-mouth effect that you get with a bold dry red wine.When I was a kid, it didn’t exist. Like everything wonderful in this world, it comes to us because of the […]
The great recession continues in so many ways but online commerce is booming as never before, increasing in the last quarter of 2011 at the fastest rates in six years.Before you know it, the retail side alone will account for $300 billion in sales per year. We click and pay, and if it’s not a […]
The organization Campaign for Safe Cosmetics doesn’t just want you to be able to have new choices about the makeup or other products you buy. It wants the FDA to be able to ban and recall products. It will decide for you what is and isn’t safe.And it is prevailing against the industry itself, which […]
There’s a jewelry store in town with a long tradition, a devoted client list, and a good record of solid profitability. But during the last year, it’s moved around like the “oldest established permanently floating crap game” from the musical Guys and Dolls.
It was downtown. Then it was not. It was reestablished on the other side of town, in a low-traffic area where people couldn’t find it. Then, 14 months later, it moved back to its old location.
Why? It was all about remodeling and renovation. The original building had been added to and added to until no more substantial changes could be made. The owners decided to “bite the bullet,” as they say. They made the choice to level the old building completely and start again with a new design, renovating the whole thing over from the ground up.
I spoke to the owner at length about the decision. He knew it would mean dramatically lower profitability over the course of 14 months. They would be spending vast sums on the new structure. The revenue would collapse. They knew all of this, making their decision a fascinating choice. One reason they chose a temporary location in a low-rent area was precisely to save as much money as possible during the transition. They also stopped adding to the inventory.
It is a tricky calculation, one that is possible only with intimate knowledge of the business, the venue, the expected revenues, the seasonal changes, the permanent costs of the business, the cost of losing some customers in the intervening period, and much more.
Did the gamble pay off? The owner is cautiously optimistic. The new store is gorgeous. It is back at its prime location. There seemed to be a lot of shoppers when I was there (but shoppers are not necessarily buyers). The revenue declined hugely and dramatically during the transition, as expected. But the revenues have been notably impressive since the reopening. However, it could be five or 10 years before they know for sure whether it was the right thing.
What’s more, there is no real way to prove cause and effect here. There is no status quo against which to compare the new reality. There are no control groups. You can only imagine counterfactuals and speculate. This is because business is not like natural science. You can’t just hold all things still and change one variable, much less repeat the experiment. The flow of life is forward, and an infinite number of things are constantly changing.
But consider what’s going on here. The job of business is to make a profit. The company was making a profit. They deliberately decided to set aside current profits in the hope that more profits would emerge down the line. In other words, you have a business here that set out with deliberation to put itself into a recession. It traded current growth for the hope of future growth down the line.
If you think about it, businesses do this all the time. Next time you are in a hotel with construction work, think about this. The jackhammers, dust, plastic sheets, plywood, hammers, and the rest are extremely annoying to customers. We walk in with a grit in our teeth. The signs saying “Please be patient with us, we are growing” hardly compensate.
I was at a hotel two years ago that had machinery so loud that I had to practically yell at the clerk so that she could hear me, and she had to yell back.
Thoughtless people imagine this is just incompetence. Hardly. A hotel exists to serve its customers. That’s the reason they are there. If you aren’t happy, they don’t make money. Construction is really a catastrophe for a business like this. It is something they undertake only if they are darn sure that the payoff, and then some, will come later.
Again, this is a very tricky calculus, one that requires vast experience in the industry, intimate knowledge of the market, and a solid sense of what the future holds (or might hold). In these cases, too, they are dealing with something pretty amorphous: the extent to which a new design and new decor are going to make the space more attractive to customers than it might otherwise be.
Mistakes are made, to be sure. But they are borne by the business, not society at large. Private property and private decision-making are preconditions for such difficult management decisions.
Imagine if you were somehow appointed as the head of an entire economy. And let’s further suppose that you had a strong sense that the most important thing was to economize on resources and you were dedicated to this task. It is very unlikely you would make the decision to redesign, remodel, or reconstruct anything ever. So long as businesses were profiting, more or less, or just functioning well enough, you would be likely to just instruct them to keep doing what they were doing.
Real life is different. Private businesses deliberately put themselves into micro-recessions all the time. They know they must do this in their long-term interest. They trade in profits now, accepting a lower rate of return for the hope of greater profits later.
Another example is Wii, the computer gaming company that was all the rage in the late 2000s and then felt the hot breath of several competitors at its back. It went into hibernation for a year or more in the hopes that a new generation of their hardware would grant a competitive advantage in the future.
Wise individuals do this, too. People forgo current income by going back to school, for example, in the hope that they will add to their personal capital stock and earn more later. If they are smart, they think seriously about the opportunity costs of these kinds of decisions.
Two years of school could cost $40,000. At the end, you are out $40,000, instead of being up, say, $80,000. You have to imagine that you are going to earn that income stream back over the coming years, enough to compensate for the missed income and earn more down the line than you otherwise might have.
Government is constantly urging people to do the opposite. I have a memory from the weeks after Sept. 11, 2001, when President George Bush was nudging, urging, and even demanding that people spend more money. He knew that economic hard times were coming, but instead of suggesting that people do what is in their best interest, he demanded that people do the opposite — on the theory that what might seem bad for you is actually good for society.
Something very similar happened in 2008. The same guy again got on national television and told everyone to go out and spend, spend, spend. It was a very strange thing. For most of American history — New Deal excepted — even government officials understood that sometimes you have to go through recession in order to experience greater growth down the line. You have to trade off benefits in the present to get greater benefits in the future.
This didn’t happen after 2008. The liquidation has never occurred. Instead, the banking system, the real estate markets, the financial system, and the federal budget have all undergone dramatic change in order to support the theory that every bit of benefit needs to be squeezed out of the current system, rather than ever permit it to pull back a bit pending a better future. The result has been a terrible stagnation, the piling up of ghastly debt, and an utterly broken financial and banking system.
Why does government do this? Two reasons stand out. It doesn’t really own anything in a real sense. It loots us and passes out the proceeds to friends. Officials bear no personal responsibility for what they do. Second, government has no local knowledge at all to compare the returns of the present to the returns of the future in any plausible sense. All the incentives of government are to extract every bit of blood from today’s turnip, regardless of what that means for the future.
This should be a heads-up for individuals. Government doesn’t want you to ever enter into a privatized and personal recession. It tries to convince you that what might seem bad for you now is actually — strangely and through some mystical metamorphosis — good for everyone, including you, later. Under this assumption, the whole of society, including you, is run into the ground.
The great lesson of the liberal revolution of the Age of Enlightenment is that what’s good for individuals is good for society. Politicians and bureaucrats deny that truth every day, but you and I don’t have to believe them, much less act on their demands.