Wednesday, May 21, 2008

My Biggest Rant

This is a business blog. The concept is to present ideas that would help business people improve both their businesses and themselves. Over the past few weeks I have been bombarded with social issues that just scream for comment. The underlying dismay voiced by most of these self proclaimed pundits is that the United States has serious problems and someone needs to step up and solve them. That someone typically isn’t the writer. What are some of the issues?

  1. The United States Ranks 96th out of 140 countries on the Global Peace Index according annual survey commissioned by Britain’s Economic intelligence Unit. (Great Britain is 49th ). Two of the major factors are the highest number of homicides per 100,000 citizens and the fact that we have the highest incarceration rate of all the countries surveyed.
  2. Gas prices are at an all time high at almost $4.00 per gallon. Gas is $8.35 in Great Britain and more than $6.50 in most of Europe, according to AA Motoring Trust, when our gas prices were still at $2.87. Whereas we consume 1.6 gallons per day per person as opposed to most of Europe at .5 gallons per day per person (Economist View )
  3. The U.S. economy is on everyones agenda. The unemployment rate has hovered between 4.5% and 5.2% since 2005 according to the US Department of Labor. The Consumer Price Index, less food, has been constant since prior to 2004. With the increase in gas prices and the fact that most food is transportation sensitive the CPI including food has risen significantly. A Gallup Poll suggests that 85% of the population thinks economic conditions are getting worse.
  4. The Dow Jones Index has risen from a low of 8235 in September of 2001 to 12823 today. That’s a 55% increase in six plus years. A dollar invested in 2001 would be worth $1.55 today. Real average earning during that same period grew from $497.35 per month to $607.49. That’s a growth of 22%. Factoring for inflation the earnings growth was only 2.3% from 2001. So the stock market is outracing real earnings.
  5. Household debt is 133.7% of household disposable income in 4th quarter 2007. Households spent 14.3% of disposable income to service debt in 2007 compared to 13.0% in 2001.

What’s the underlying business concept to all of this? It’s responsibility. The problems we are facing are problems we can deal with on an individual basis. If, and it’s an incredibly big IF in an entitlement culture, we all take responsibility for our part of the problem, it solves itself.

Number one on the list is dismal. Twice as many citizens were killed in the state of California during the duration of the Iraq war then were killed in that war. Several points scream out to me…

  1. This is just one state in our union. The needless death toll in our own back yard is staggering.
  2. These people neither volunteered, were skillfully trained, nor took an oath to die, they just got up in the morning thinking they would make it through another day and didn’t.
  3. There is no outrage from the public like there is for the war. We have come to believe this is acceptable.

I visit prisons every year. We can’t afford to continue to build prisons at the rate we are currently building them. Something has to change. I suspect the real reason is that we don’t expose this like the war, is we might feel somehow responsible for not doing our part. Because it happens all around us, we might be asked to actually take action to prevent it. The war is a long ways away and we can’t possible impact the outcome, so we vent and rage for someone else to take action.

The problem with rising gas prices is not a matter of the government reducing taxes, but modification in our social norms. Not an easy task to accomplish. We are Americans and the constitution says we can have and do anything we like as long as it doesn’t impinge of the freedom of others. So I want to drive a big car anytime and anywhere I want and the government is responsible for assuring I can continue to do this. Capitalism is great as long as I get what I want at the price I want. If not, the government needs to step in and mandate my happiness. This is just self-center goofy thinking. Only desperate times will change this. It’s an unfortunate aspect of human nature. We have lived the high life so long we expect it to last forever without our sacrifice. As China and India continue to grow their economies, this problem will continue to grow. It’s not a matter of our government solving this. Free enterprise and right thinking by the general public will solve it, if we choose. If not we will be doomed to second class status in the world economy.

The last starts with the very basic premise of spending less, investing more. If we take control of our spending and invest the difference two things happen. First we capture back 14% of our disposable income used for servicing debt. Second our investments grow faster than real earnings. As individuals we have more. More importantly we invest in businesses that provide jobs and stimulate the economy. Unemployment goes down, employee demand goes up, wages rise, we invest more and the cycle continues.

It's all about individual responsibility. Something we have total control over.

Monday, May 5, 2008

How do you catch wild pigs?

There was a Chemistry professor in a large college that had some exchange students in the class. One day while the class was in the lab the Prof noticed one young man (exchange student) who kept rubbing his back, and stretching as if his back hurt. The professor asked the young man what was the matter. The student told him he had a bullet lodged in his back. He had been shot while fighting communists in his native country who were trying to overthrow his country's government and install a new communist government.

In the midst of his story he looked at the professor and asked a strange question.

He asked, 'Do you know how to catch wild pigs?'

The professor thought it was a joke and asked for the punch line. The young man said this was no joke. 'You catch wild pigs by finding a suitable place in the woods and putting corn on the ground. The pigs find it and begin to come every day to eat the free corn. When they are used to coming every day, you put a fence down one side of the place where they are used to coming. When they get used to the fence, they begin to eat the corn again and you put up another side of the fence. They get used to that and start to eat again. You continue until you have all four sides of the fence up with a gate in the last side. The pigs, which are used to the free corn, start to come through the gate to eat; you slam the gate on them and catch the whole herd. Suddenly the wild pigs have lost their freedom. They run around and around inside the fence, but they are caught. Soon they go back to eating the free corn. They are so used to it that they have forgotten how to forage in the woods for themselves, so they accept their captivity. The young man then told the professor that is exactly what he sees happening to America.

There is a lot to be said concerning government entitlement programs, not all of it is bad. But I want to address the entitlement programs in our lives, the ones that we create for our own benefit. They are the short cuts in our lives that at the time seem expedient, but later sap us of the drive end energy to push through much harder issues.

In college I took four semesters of calculus. Four mind numbing semesters of proving theorems that were printed in the back of our CRC. It was a slow and repetitive process that didn’t seem to have a goal other than to make us work harder. Once I got to Differential Equations and Applied Differential Equations I understood why. This process of proving what had already been proven provided me with the framework to analyze much more complex ideas. The hard work in the beginning prepared me for the work ahead. I could validate amazing concepts that previously seemed impossible to comprehend. (Calculating the center of mass of an irregular object) Many students never got to “Diffy Q” to see the fruits of their labor.

How many times are we so busy multitasking that we lose the lessons that eventually imprisons us in mediocrity? We are looking for a free lunch thinking that it will always be free. The problem is that it will be free as long as you never want to be more than you are. We slowly lose our ability to think outside the box. Psychosclerosis sets in. We become so convinced that new ideas won’t work, that we lose the ability to move forward and grow. We start to love the fences around us. They bring us comfort. We start to believe we will always be able to provide for ourselves and our families using only the skills, talents and knowledge we presently have. We can somehow start to coast to the finish line. I see this happening to younger and younger generations


Continually strive to stretch your imagination and knowledge. Go through the pain and sometimes boredom required to grow. Never stop. It will pay tremendous dividends for years to come.

"A government big enough to give you everything you want, is big enough to take away everything you have." - Thomas Jefferson