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2010-03-15

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Posted by Fred 2010-03-15 00:00|| E-Mail|| Front Page|| [11138 views ] Top

#1 And there is a neat summary of what is wrong with any business startup.

Posted by newc 2010-03-15 00:56|| 2010-03-15 00:56|| Front Page Top

#2 Even though nobody wants to pay much, everybody's leveraged to the hilt so lessors can't cut their own prices.

While we are continually told by the real estate industry and all the other special interests that costs determine prices, they don't, except to the extent costs influence supply, which is mostly over the medium to long term.

Otherwise goverments can't create jobs. What they can do is drag future jobs into the present by borrowing and printing money. This is Keynsian counter-cyclical 'stimulus' spending, which is blowing up in our collective faces in the form of the sovereign debt crisis.

Posted by phil_b 2010-03-15 04:11|| 2010-03-15 04:11|| Front Page Top

#3 People in government, who have never been truly productive in the private sector, who do not understand that a good and decent society has a public sector which serves rather than rules, telling the truly productive how to do their thing.

OKA insanity.

Posted by no mo uro 2010-03-15 06:27|| 2010-03-15 06:27|| Front Page Top

#4 Excellent Fred!

While we're re-inventing, could we illiminate "consolitated school districts" sell some of the busses, and go back to small neighborhood schools?

Could we give Walmart, Lowes, and Home Depot some tax incentives for stocking and selling AMERICAN MADE merchandize?

Could we encourage with tax incentives, Exxon, Shell, Marathon, or BP to build a couple of new oil refineries and begin drilling off our own shores?

Could we work with the Mexican government and smart contractors to establish prisons in Mexico for illegals sentenced for crimes in this country?

Could we encourage more companies like Toyota to come here and set up manufacturing facilities by making ALL states RIGHT TO WORK states?

Since we are supposed to be a capitalistic system, could we insist that politicians be US Citizens who have participated in the free market system by working or owning US businesses or medical practices, as opposed to law firms?

Could we bill governments for medical services performed on folks from foreign countries who wander on over the border for a hospital visit?

Could we actually go BACK to "government cheese" and peanut butter, and put a 26 week cap on unemployment benefits and food stamps?

Could we pull out of foreign adventures in the Middle East and Africa and destroy Tripoli and Tehran with fire bombing the next time one of them so much as utters a threat against the United States.

Rant over.

Posted by Besoeker 2010-03-15 08:32|| 2010-03-15 08:32|| Front Page Top

#5 Fred, it's very mean of you to propose putting all those nice government regulators out of work. Plus all of the 'tail' which supports the regulatory 'tooth.'

Posted by Free Radical 2010-03-15 11:01|| 2010-03-15 11:01|| Front Page Top

#6 Excellent analysis Fred of what's wrong with business today--too much government meddling and lack of incentives. It can still be done however the model has to be changed somewhat. My father-in-law came to this country at the end of WWII. He started a small watch repair business in the corner of a dry cleaners. As he worked hard (very hard), he was able to move out and start his own business. He did quite well eventually. He had the equivalent of a 6th grade education and didn't know about management by objectives and all the other terms MBAs love to throw around.

I started a consulting business. I started modestly in my home. The business grew, income-wise every year but never left the status of a home office. I never hired anyone--just the wife and me and an occasional contract worker (but not often). Man it took a lot of hard work--sometimes day and night. My wife and I did everything, advertising (modest), billing and follow-up, the technical work, and taxes.

Using the furniture manufacturing model. One could start at the hobby or cottage industry level with power tools you have or buy at Home Depot. Sell the stuff at craft fairs. Try to put enough away to of the proceeds away to expand the business and move out of the house. At that point I think the business would then start to follow the more complex model you outline and all the attendant problems.

Posted by JohnQC 2010-03-15 11:20|| 2010-03-15 11:20|| Front Page Top

#7 Another example of the model is a woman who started making botique soap in her home. She started modestly at the hobby level. She gave the soap as gifts to her friends. They really liked the product and asked for more. She then started showing up at craft fairs and selling her stuff. Her business started growing and then really took off. She had to work very hard to make it work. A lot of young college graduates headed to Wall Street as financial planners because they thought they could start at the top and make a lot of easy money. Look where we are today.

Posted by JohnQC 2010-03-15 11:27|| 2010-03-15 11:27|| Front Page Top

#8 some problems

Norfolk and Western did not go out of business. It merged with Southern and the combined corp has done reasonably well lately.

Similarly the b&o merged with the Chessie system to become CSX. It also has done reasonably well.

The Pennsylvania RR has a more complex history but parts of it are no owned by CSX and parts by NWSouthern

Posted by lord garth 2010-03-15 13:06|| 2010-03-15 13:06|| Front Page Top

#9 Small scale businesses are, as Fred notes, likely to provide a family living and not much else.

Mid-scale businesses are hard to grow from small scale businesses today in part due to government regulations but also due to changes in manufacturing technology. For many industries, the cost per unit of manufacturing has dropped dramatically, but only after one acquires the necessary capital equipment as well as the site etc. Those mid-sized companies that have prospered in such industries have a special niche - Pompanoosec Mills makes outstanding hardwood furniture, for but charges a lot more for it than the stuff you can buy in boxes for self assembly.

Or they are services companies, and guess who the main clients of IT services are? Yup, governments.

For some industries there are no substitutes for a fully-capitalized startup. A new semiconductor fab now costs between $10 and $15 billion to create. When an industry's entry costs are that high, you need the skills of an MBA because what's at stake isn't the product or the craftsmanship, it's the ability to attract financing, manage cash flow and return on investment, negotiate strategic partnerships etc. At that point the product is a secondary concern.

Which is indeed a problem because it leads to unacknowledged tradeoffs, like emptying out this country's manufacturing capability in order to compete when the profit per chip is less than 1-3% of price.

Under Reagan we understood that some advanced industrial capability should be protected because it was tied to national security. Bush the elder never got it - he went to Japan and talked about cars rather than electronics and software. Clinton outsourced the whole damned thing, and got campaign contributions in return because in essence he was transferring all of the leading technologies we'd built over 20 years in a short time to a rising competitor. And Bush was too busy fighting two wars to even begin to figure out how to roll the Dems on this without locking in the old school, deadhand unions.

What we need - in addition to Fred's excellent suggestions - is an equivalent of the old space and defense programs that jumpstarted risky, high-investment, bleeding edge science and technology. For the last 30 years we've been living off those investments in the 60s and 70s, but we're down to the last bits of seed corn husks in the last sack. And while Americans have been insisting on our right to party till we puke and Europeans have been spending their 6 week vacations at health spas China and India and others have been turning out engineers and scientists who in some critical areas now objectively are more advanced than we are in key research areas.

Posted by lotp 2010-03-15 14:28|| 2010-03-15 14:28|| Front Page Top

#10 PS: full disclosure -

The above opinions are shaped by nearly 3 decades in startups and small-mid sized companies (including one I started and others I held leadership roles in), a number of years in higher education as faculty where I got to see firsthand how our students stacked up against the grad students coming in from overseas, and now in defense R&D.

FWIW

Posted by lotp 2010-03-15 14:30|| 2010-03-15 14:30|| Front Page Top

#11 We can contrast this with the COMMUNISTS China model: Step 1: Open for business, there is no step two except make or break on your business model. Yes I know they have some Quality Control issues but so did America at one time. We are regulating ourselves out of business.

Posted by Cyber Sarge 2010-03-15 15:53|| 2010-03-15 15:53|| Front Page Top

#12 Lotp wrote:

"And while Americans have been insisting on our right to party till we puke and Europeans have been spending their 6 week vacations at health spas. . . "

Everything that comes after that in the sentence is less important than this part. Absent the entitlement mentality the threat from China and India and anywhere else, really, would be nonexistent.

When the boomers and x-ers and whichever letter you want to apply-ers grew up imbued with the notion that certain material standards of living and income-stream security were the birthright of all Americians regardless of whether or not they were productive or hard-working or how the rest of the world was productivity wise, the die was cast. The distance from "Everyone my age should have a house and a car and bulletproof job security no matter what" to where we are now is a tenth of a hundredth of a baby step.

We can and should decry the blunders of MBA's and CEO's and politicians, but none of this would have been possible wihout a public who thinks that the postwar level of job security and labor compensation vs the rest of the world are a forever birthright.

Posted by no mo uro 2010-03-15 16:11|| 2010-03-15 16:11|| Front Page Top

#13 A thorough and sad analysis, Fred. But your truck drivers just went out on strike and your newly unionized employees are doing a sympathy walkout.

Perhaps you would be interested in my new arson-for-hire business? We can get some of your insurance money back. We also provide quick relief for underwater mortgages. Have match. Will travel.

Posted by SteveS 2010-03-15 16:41|| 2010-03-15 16:41|| Front Page Top

#14 "Perhaps prices have gone down since."

Ever the optimist.... ;-p

Posted by Barbara Skolaut 2010-03-15 23:38|| 2010-03-15 23:38|| Front Page Top

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