Archive for November 11th, 2008
What the hell happened? Sometimes it is hard to wrap my mind around the ridiculous notions that people get in their heads. If you visit my brother’s site, www.travisthornton.net, you will find a much more enlightening discussion over the Federal Bailout. I, was not schooled in the nicetiesof political science, so I am going to shoot straight with you. Say you were to start a restaurant, and it did not do so well. You cannot really recoup initial capital invested, and you have to close the restaurant. Seems like a simple concept to most people. Now, say you are in charge of a large automotive manufacturing company that has steadily lost market share since Baby Boomers would actually buy imports. You are hemhoraging money. You have a long string of layoffs, but eventually you are going to have to fold up. What’s the difference between these two business models? Certainly one exists on a larger scope, holds more value when affecting the national GDP, and employs a unionized work force that is a political goldmine in the “swing states”. However, it is still a private business. If someone puts their money into a GM, Ford, or Chrysler and invests capital (in the way of money) into their production, and the venture fails… Well, the venture should fail.
There are no, and should be no guarantees that every time you make an investment that you will make back a profitable return. That is the nature of free enterprise. Risk. If you take a risk, sometimes you are going to lose. If you agree to a adjustable rate mortgage, you have to realize that eventually your payments will increase. If you are a lender, sometimes the person in debt is going to default. If you are an insuring agent and you insure one of these loans, sometimes you are going to have to pay off that policy because of the default. Taken all in, if you see that this problem is pervasive throughout the housing industry, which provides the basis for the financial industry, then you are bound to fail one day. We did that, through oversight on the part of both Democrats and Republicans, we did that. The revolutionary idea that I will suggest is this, it is not the private citizen’s responsibility to reward someone else’s risk gone wrong.
If you base your business on risk or a product that does not attract market share, perhaps you should find another venture. Detroit automakers should be the first to make a change to an entire fleet of Hybrid and Fuel Efficient Vehicles. However, they would have to start small, and I’m not talking about just 5% of their production line. Seriously downsize the workforce and only focus on the kind of cars that concious buyers are looking for. GM is even producing Hybrid Silerados and Tahoes now. As a man raised in the rural setting, and a cheap/Earth-concious consumor, this is great. I will be able to get a truck that is still good for the Earth. If I were GM, I would be hammering this product. I wouldn’t have made the switch to Hybrid so gradual. I would have swiftly cut production and the workforce and retooled to produce strictly Hybrid vehicles, but here again, they have union quotas to appease. Communism at its best, crippling the American Auto Industry. Now, the Socialist suggestion of Bailout (which let’s not forget is just government ownership of a private entity) for the Big Three. How fantastic! Not only will our Financial Industry be government owned, but so will the Auto Industry. Therefore, we will have to go to our Government Car Dealership and get our Government Car Loan pending government approval. Slippery slope?
I guess my real reason for embarking on this rant is because Circuit City has filed for bankruptcy and humorously or seriously, there have been mentions of using Bailout money to help them out. I think this enrages me because Circuit City does not actually produce its own goods. It is a retail chain. It sells the same things that Best Buy does. However, Best Buy has garnered the lion-share of the electronics market, because they simply can sell things better. The product that they produce is the buying experience. I would just rather be in a Best Buy store. Circuit City stores are usually in disrepair if they are the older variety, and have a cheap presentation in their new stores. The buying experience in Circuit City is awful. If people don’t buy their electronics from there, they fold. It happens.
If a private business fails, let it fail. It is private. In the immortal words of Hyman Roth, “There was this kid I grew up with; he was younger than me. Sorta looked up to me, you know. We did our first work together, worked our way out of the street. Things were good, we made the most of it. During Prohibition, we ran molasses into Canada… made a fortune, your father, too. As much as anyone, I loved him and trusted him. Later on he had an idea to build a city out of a desert stop-over for GI’s on the way to the West Coast. That kid’s name was Moe Greene, and the city he invented was Las Vegas. This was a great man, a man of vision and guts. And there isn’t even a plaque, or a signpost or a statue of him in that town! Someone put a bullet through his eye. No one knows who gave the order. When I heard it, I wasn’t angry; I knew Moe, I knew he was head-strong, talking loud, saying stupid things. So when he turned up dead, I let it go. And I said to myself, this is the business we’ve chosen; I didn’t ask who gave the order, because it had nothing to do with business!”
Let’s let bad businesses of the past go and (though painful at first) refocus on ensuring our Free Economy is more free than a Nationalized Economy.
