In an ideal world, no business would ever go out of business. Businesses are nothing more than groups of people -- people who come together because their interests are aligned. Some have money, some have skills, some have ideas. And in a business, those useful things come together in a combination that makes everyone better off -- including the customer.
But for a while, we're going to see some businesses close, whether voluntarily or through bankruptcy, and it's going to hurt. Investors will lose money, customers will lose access to goods and services, suppliers will lose contracts, and people will lose their jobs.
Much of the present pain could have been avoided, but wasn't. The government interfered too much and too often -- encouraging us to buy, buy, buy, in order to re-start the economy after 9/11. It shouldn't have been so aggressive. It also shouldn't have made promises long ago (back in the 1960s) to take the hit when mortgages went bad, and then actively stoked the fires of a real-estate boom. But it did anyway, and now we have to pay the price.
Businesses chased short-term profits while sacrificing long-term gain, and wrote their own death sentences in the process. Promises made long ago in pension plans were ignored and misleading accounting was given a wink and a nudge, while honesty and transparency were hard to come by.
Investors and consumers bought into the hype, once more, that "this time everything would be different" and the bubbles wouldn't pop -- in stocks, in real estate, and especially in cheap credit. We, collectively, borrowed too much, saved too little, and trusted business managers and government officials who promised us that we could have everything in our wildest dreams without ever suffering a down market or paying off our tab.
Maybe now, we'll wake up. We're alert now to some of the problems with our finance system...but we're still blissfully ignorant as a culture of the other problems out there -- some even bigger than the ones we're facing right now.
We've put too much stuff in the path of natural disaster without taking adequate precautions to keep it from getting broken. Hurricane Katrina was a catastrophe...but a hurricane is going to hit New York City, huge earthquakes are overdue in Los Angeles and Memphis alike, and clean water is running short from Las Vegas to Atlanta.
We've pretended as though we can actually pay for all the medical care and prescription medication that everyone will want from age 65 to death...without finding anyone to foot the bill. We let our politicians buy their own re-elections with taxes they'll impose on today's 5th graders.
We've skipped out on maintaining our infrastructure, even after watching a bridge collapse in downtown Minneapolis during rush hour and seeing the lights go out all over the East Coast for days at a time. We've let our air-traffic system wallow in antiquated technology of the Carter era and we can't be bothered to install enough weather radar systems to even cover the entire country.
We've built up a Federal debt that can't even be accurately measured -- and let it grow on autopilot as though not paying our own bills is any better for a country than it is for a household. And in the face of warnings that we'll have to pay higher interest rates on the loans we've taken out, we've scoffed and patted ourselves on the back for being the best credit risk in the world.
We've let pension underfunding reach scandalous levels, using accounting practices that wouldn't pass muster at a church bingo night. And at the same time, we've never paid even a modicum of attention to teaching people how to invest for themselves. We have nannied and babied ourselves straight into financial illiteracy.
Despite all this, I've done two things this week:
1. I bought stock.
2. I brushed up my 100-year business plan.
Douglas Adams wrote that the most important words in the world were, "Don't panic." And he's right. Big banks may be messed up. Big carmakers and airlines may end up in the toilet. Big government may find itself forced onto a diet by lenders who just say "No." But we still haven't forgotten how to make the wheel. The Internet still runs like it used to. Heart surgeons still know how to wield their scalpels.
In short, the things that make us better off today than 100 years ago are still in place. The knowledge, the skills, and the technology are still here. We just need to re-adjust how we use them. And there are deals aplenty to be found -- businesses that are doing well and that will continue to do well for many years to come.
In that ideal world where no business ever goes out of business, two things keep the system afloat:
1. The pie always grows. By getting better at everything we do, we can take the same 24 hours in every day and the same planet Earth to make more and do more all the time. And each generation lives better than the one before it.
2. When something changes, managers do their jobs and adjust to those changes. One of the core assumptions in accounting is the reliability of an organization as what they call a "going concern" -- that is, the assumption that the doors will still be open tomorrow. There's really no reason at all for any business not to still be open 20, 40, or even 100 years from now, either. The form may change. What the business does may evolve. Its physical location may grow, shrink, or migrate. In fact, all of those are likely over a long enough period of time. But the job of management is to take every reasonable step to ensure that the doors stay open.
The word we need to bring back is "mutual." Capitalism is about mutual benefit -- without care. In other words, you don't have to care about me, and I don't have to care about you...but we can get along and do business together because we're both better off for it.
Sales trainers pay lip service to the "win-win" deal. In reality, every deal should be "win-win." And over the long term, the more everyone wins and wins, the bigger the pie grows. That's what we should be after: A bigger pie, year after year after year.
What's most frightening about the situation at this very moment is how much of it points to a future of no wins, but lots of forced caring. Should we get an activist Congress and an activist President -- all of the same party -- together at once at a time when lots of people, having been convinced they can't take care of themselves anymore, just want someone to take their worries away...well, that's a confluence of events that could become very expensive -- and shrink the pie in the process.
Government helped make the financial system that's produced so much rotten fruit. So to imagine that the government will save us from further injury is worse than naive -- it's willfully ignorant. The government already has done far too little to deal with the problems already evident and already sitting right on its plate. Medicare, Social Security, pension underfunding, the Federal debt...not one of these is a surprise. Yet Washington hasn't done a useful thing yet to fix them. And now it proposes to protect us from new boogeymen, too.
We have to start saying "No". We desperately need a divided government to take over in January 2009. Let them bicker and fight and get nothing done. That's what we need. They've already been far too skillful at doing too much of what we don't need.
We have to start saying "No" at the public ballot box and in our shareholder meetings, too. We have to start saying "No" to new debt -- personal and public alike. We have to start saying "No" to new programs and new schemes, whether they're in the name of redistribution or in the name of "economic development."
We have to toughen ourselves up personally, teach our children more and do so in better ways, and we have to revive the mutual spirit that says we can get together in lots of ways that make us all better off at once. We need mutual funds that work for all of us, mutual-aid societies that actually take care of us when the need calls for it, mutual insurance plans that actually pool and divide risk rather than playing it like a roulette wheel, and mutual capitalism -- win-win deals all around.
And most of all, we need to think of the children. Not in that cheap and tawdry way that people will lean on when they want more of your tax dollars for things that they want, but in the way that ensures that our values, our communities, and our businesses are around to benefit them in a few years. We're living longer than ever before, and we may be close to living to see even another generation or two before we ourselves pass on. We're answerable to those people, whether we'll live to see them or not -- but imagine if we start living to see them and we fail to chart the course for them to benefit. A pilot simply doesn't take off with a load of passengers, then parachute out a hundred miles from the destination, wishing the passengers "Best of luck" in finding their way safely to the ground. Deliberate choices get us from one place to another. If nothing else good comes of the moment we're in now, we can at least start making a conscious effort to chart a course for mutual benefit.