Archives for category: Economy

Going with the point from the end of my Obama rant:

After all, lets say you had to put Romney or Obama in charge of Apple or just friggin’ Walmart! Would you even trust them to do a good job managing all the different services of any one of those companies, raising profits, making people’s lives better and providing the vision it needs to do better in the world tomorrow? No? Of course, not! Because they aren’t qualified, and its too big for them!

The first thing to understand is that the government really is like a company. It provides services in return for payment (taxes). The government unlike most companies however, has far too many responsibilities and areas where it should ideally be doing a good job. Unfortunately, few of the people in charge of those responsibilities are the kinds of people who can make sure that those services are provided well and for cheap (so that we have to pay less taxes while still getting as much or more stuff)

Businesses in general are more accountable in that they know they need to make money. Without money they can’t pay their people, they can’t pay for the services they themselves depend on, they can’t build new branches to try to make more money. Without the right kinds of investments and more profit, they can never have enough money to make the lives of their owners, shareholders and employees better.

Well Walmart might not make their average employee’s life great, but as they expand, they create more jobs so that people who might not otherwise have a job, have one. That’s not a small service to perform. If they weren’t profitable, they wouldn’t be able to create more jobs.

Anyway, lets assume that like our country, Walmart was just not making a profit, but still had a decent amount of money and credit left. What could it do if it wanted to not have to fire people as well as become profitable again?

First, define goals clearly:

  1. Survive – this is paramount. The company can’t help anyone if its dead.
  2. Become leaner – save money where you can so you have more capital to work with. You can’t force people to buy your stuff, but you can cut extra expenses.
  3. Trim the fat – if a store is just never going to be profitable, stop spending money on a lost cause. Bad times are times for decisiveness.
  4. Find more ways to make money and reduce costs – research, negotiate better deals, find better partners.
  5. Make better use of people and avoid losing jobs or hurting morale in these hard times – as opposed to pushing the unemployment burden on government. Retrain and relocate people who are willing to move (Especially the more dedicated and capable ones). And make sure that you have the best people providing leadership to all the key areas. Move the more talented people to be in charge of things that are more important for success.

Actually that sounds more like a Japanese company, where both the leaders and the workers are more loyal to each other. But anyway. Stating the goals is good because you have to know your priorities and because putting it out there makes you think it through and see if there are any obvious errors in your assumptions.

After defining goals, you generally need to define measures of success. Like: Cut costs by 35% in one year across all of xxx departments. What good does this do? It also helps you set milestones and see if things are going according to plan so that you can take action before its too late. If six months have gone by and you’ve only cut 5% costs, you know your approach was wrong and you’re probably not going to meet your objectives and its time for a change. Better to know that you acted like an idiot while you still have time to make things better.

The other and often more important benefit of defining goals: It lets you and others see what you’re thinking and thus helps avoid stupidity. To illustrate that point, lets take the example of using happiness or lack of pain to determine the value of your life. Many a drug addict has run himself into the ground by using that incomplete measure of what constitutes a good life. Let that be a lesson:

Only by having the right priorities and by correctly defining what constitutes success can success be achieved.”

… More on how to apply above principles to saving the country at a later date perhaps. But ultimately, like a business, the country needs to make more money in a sustainable fashion or we’re all screwed. That requires improved efficiency, greater creativity, and sacrifice where necessary. So that the country can be healthy again. If the country has more money, it can afford to create better education, better environment, safer lives – but it all boils down to money. We have to make the country work better for it to make people’s lives better.

Advertisements

There is a simple sort of fact about talented American professionals… They aren’t particularly loyal. Even someone brilliant can make mistakes that have unfortunate consequences – that doesn’t mean that the companies (or the government) are going to find someone better than them to fix the mess. They probably understand it better from having seen all aspects of it while it was evolving and probably thought about how to fix it even if nobody would let them – yet.

The key issue however is motivation. People have to feel motivated to do their best work. They have to feel acknowledged and respected. And if you don’t treat high level professionals like you think they are awesome, they will go work for someone else who does. At the least, they won’t give you their all.

Ultimately, these are still the kinds of people who need to be more passionate and working at higher levels to help make things better overall because there is no one else who can. And ultimately, it wasn’t just a few people who were at fault for our current economic mess. Everyone down to the people who took loans they should have known they’d never be able to pay back – is at fault. Millions of people made mistakes and that many people have to contribute to fixing things.

Its not like a lot of people weren’t happy earlier that they could buy homes for their families. It just didn’t work out. There’s no point in trying to put all the blame on one party. Nor is there any reason to be upset if you were a part of the problem, since a lot of other people made similar mistakes. We just need to make the most practical decisions we can and move forward.

Let me start by saying that we should move to the Fair Tax system. You can click on that and it’ll open in another window.

But that’s not what we’re here to talk about. To understand why reducing taxes isn’t enough, we first need to understand how the economy works, and to do that lets use the example of … Beggar communities in third world countries:

What happens when lots of people give them money? They develop a lifestyle of begging. But more than that, they now have money to spend. With enough living in an area, small shops start to form, and small service economies pop up to support the needs of these beggar communities. Leaders of sorts, small time entrepreneurs, crime lords etc. pop up to help coordinate, provide safety and take their cut. Predatory money lenders might find people to take advantage of here because these people do have a consistent source of income, and things they feel they need that they will make bad deals for.

Children raised in these situations will likely not receive schooling and even if they do, this is the life style and the kind of people they grew up with so they won’t be able to integrate easily with people outside of these societies. Short of severe external interference and people willing to force their will on them to change their lives for the better, their fate is sealed because few people ever manage to leave their comfort zones – even when those comfort zones are also painful.

… This is an example of the bad that can come from unintelligent use of money. Even if the act of helping beggars out seemed well intentioned to the people giving them money, it has long term consequences.

Now, lets consider an example that’s closer to home: You can invest money or buy products from a new food chain that sells some new random brand of tacos that sounds cool, or you can invest money or buy products from a company that creates more efficient truck engines. In the first case, money will contribute to the expansion of that new taco chain and maybe research into improving the taste. On the other, the company will expand its business and do more research that may produce more efficient trucks.

What’s the difference? The latter case creates the opportunity of building new engines that make all transportation cheaper. That means that the price of food and other goods might drop because it costs less to transport so that even if your salary doesn’t increase, you have more money left over and can buy more stuff that you want. We might be able to sell these new engines to other countries and make some money off of that. The world’s supply of oil might last longer while we try to find alternate energy sources.

If you just reduce taxes all around, the government has less money to be able to take any kind of productive action, and since there is no large guiding principle in people’s use of money, there’s a random increase in the flow of money into the various parts of the economy. Some of it will actually go to stuff that might save our economy from oblivion, while other money will flow towards helping the competition between companies selling different brands of toothpaste and creating that minty new flavor.

Obviously, a random reduction in taxes isn’t what we’re looking for. Some people and businesses can afford to pay more taxes and likely aren’t going to help improve things much. But stuff that has a chance to either make things cheaper for us or help our country make more money internationally – that deserves to have more money flowing to it. Perhaps not just as reduced taxes but also in the form of additional funds – that could be paid for by taxing companies or people that aren’t doing stuff that’s as useful.

And yes, some companies may be able to afford fewer workers or expand less if they have less money. But in the long run, if the economy tanks because we couldn’t stay ahead of the curve, it won’t matter if we saved a couple of jobs in the middle of nowhere today because there will be fewer jobs everywhere tomorrow. The solution for jobs isn’t to try to save every small business today by reducing taxes, the solution there is to create systems to help support moving people to other more valuable jobs more easily and keeping them okay on the way to getting there. Change is uncomfortable but change is necessary and what we have to focus on is making positive change easier.

Lets keep this short and painful.

Romney

“China has been artificially reducing the price of its currency and I will place tariffs on them”

Reality Check: That means that both US consumers and US businesses get to buy Chinese products for cheap, thus our money goes farther and our businesses can do more. 

Consequences of his brilliant idea: If we did this, Everything in America would be more expensive. Our businesses would have to pay more for anything they buy (laptops, printers, furniture), and most likely instead of local businesses forming to try to be competitive (unlikely and time consuming)… We’d likely have European countries or someone else just have China build them products and sell those to us so that the Europeans could make an extra buck for providing Chinese services to us indirectly. Are you going to put tariffs on England and France too?

Then, we have the problem that right now China and the US need each other and will help each other to some degree. Start an adversarial situation and China has to think about defending itself against us. Maybe offering services to other countries even cheaper so that they can move ahead faster than us. Maybe just by making some things more expensive for us that we don’t want to have be expensive – and seriously if prices are going to rise, China would no doubt prefer to sell at higher prices than let the US gov collect more taxes. Feh.

… And this bungling idiot considers himself a businessman. Where do they get these morons?

Ultimately China and their cheap labor is something we could use to save ourselves.

And here’s an example:

Now we know that people can have more money in two ways: “Make more money, or spend less” – one way you spend less is if stuff is cheaper so that you get as much for less.

So, what if we negotiate with China to help us produce vast numbers of trucks with hybrid engines so that they cost less fuel, and we negotiate down on the price so that its even cheaper than it would be otherwise? What would that do? Practically everything in the US could be a little cheaper because moving goods across the country costs money. We’d spend less to move stuff, so everyone could afford to sell it for a little cheaper… China makes money, and our lives become easier.

The point is simply to say that if we are creative, that cheap labor can be an advantage for us. A waiter in the US and a waiter in China may do the same work, but because our currency is valued higher, the waiter here can buy cooler stuff and overall has a better life. Businesses have similar advantages if they use their heads. If China artificially makes their stuff and services cheap so we can take advantage of them, lets take more advantage of them.