Why I Like Slowdowns

It's no secret that fast growing markets are also immoral markets. When we spend wildly, we create wide vistas of selling opportunity. It's also not a secret that as market growth slows, those vistas shrink and with them, go a bunch of ideas that sit somewhere on a spectrum of mediocre to outlandish. Could the Escalade or the Credit Default Swap actually have been conceived had we not had a decade or more of decadence?

Rabid market exuberance produces superficiality in gross quantity. I won't begin to list nor will I pass judgment on the visible excesses of the years since the Dow passed 5000. I'm as guilty as the next. I counted no less than 7 iPods and 11 cellphone in my four person household yesterday. This post isn't about things we didn't or don't need. It's about what we need now.

Slowdowns are centering events. Slowdowns force us back to basics. Slowdowns don't just re-emphasize the things that matter, they remind us that in the end, value measured in quality of life is all there is. In that context, leaders are forced to listen and think, organizations are forced to change for the better, and teams see the clear power of collaboration.

Organic creativity is a natural outcome of destruction. At the end of the shaking and quaking of contracting markets are sparkling ideas, some new and some renewed, that improve lives. Consider the family picnic, where kids and parents toss a ball or play tag. Today, it may be a nostalgic rarity. But after a year or two of belt-tightening, you can be sure that parks will be packed, and families will be making memories. That's why I like slowdowns.

- Nicholas Hayes

Re-tooling Rules

Governments should step in to assist companies with retooling costs when it is a matter of strategic national interest. It was such a matter when auto makers become plane makers in World War II, and it well may be as SUV makers become Hybrid car and Train makers as we wean ourselves from oil imports and begin to fight climate change.

But let's be clear: this can't mean adding tooling --- it must mean re-tooling; tightly defined as the direct replacement of defunct lines and processes and the removal of related carrying costs. So it must not cover losses incurred from past poor management decisions. The mechanism for shedding these costs is clear and legal: it is Chapter 11.

So here's the order that we must follow:

1.) GM files for bankruptcy to shed its legacy costs and weak leadership
2.) The feds work with GM's new leadership to develop a real plan for lower energy transportation, and to agree on technologies and specific timeframes
3.) Re-tooling costs are shared -- with public monies treated as a capital infusion in return for equity.

The clear consequence is that retired auto workers are going to lose pensions and health care, and current workers may not have a place. Let's tackle issue one at a time. But let's also be honest:

Given where we are, it would be a terrible mistake to use the government to prop up obsolete production lines that are, in effect, counter to our strategic national interest. No American should play a role in the production of a gas guzzler, ever again.

Forget Consumer Confidence

Today's dominant headline shouts that consumer confidence has slumped and with it, goes the global economy. Breath deep; let's pause to consider that this event reveals a correctable flaw in how we measure growth and prosperity.

If your objective is to skim a few cents from many transactions, like many insurance companies, investment banks, or big box retailers, then of course, you can't afford to have the flow of those transactions slow much before you have to cut jobs.

But if your objective is to build a solid economic foundation that can withstand the ebb and flow of paper trades, you'll forever forget the idea of skimming and focus instead on value creation, with value measured as quality of life.

In this way of thinking, consumption isn't the engine of economic growth, it's just fuel for volatility. Debt-fueled consumption is counter to economic health because always carries dire long term consequences. Alternatively, the wise investor knows that debt is appropriate if it returns a higher quality of life in the future. We've become acutely aware of this concept in just the last two months. If we remain aware of it for a time, then we can plan for some realities:

• Oversupplied markets will shrink to their appropriate dimensions. We can afford fewer investment banks, for example.
• Actual measures of competitive advantage will apply. Fast, smart, long-lasting, purposeful products and services will always win. It's only in the last 10 or 15 years that lesser quality has been perceived to be better. This was always false.
• Good ideas in green, lean and local will come together in innovation hotspots and create new jobs. Expect a retooling from auto to Internet, infused to fresh, silos to collaboration. Manufacturers that stay put but reach out and remain flexible, and continue to solve real problems will emerge stronger.

Now is precisely the time to ignore consumer confidence, and instead focus on the positive outcomes that we know always emerge from austerity, discipline and real human energy, ingenuity and effort; outcomes like time, health, character, safety and comfort.

Obligation and the Social Safety Net

Americans are obsessed with taxes and welfare as if they are late-stage cancers. We’re wasting time worrying about the wrong things. It will take a generational view to see why, and what to do about it.

“Welfare” used to mean safety net. Today, “entitlement” is code-word for an addiction to welfare. This is not to say that welfare recipients don’t become welfare addicts. Some very well may.

Just 50 years ago, white Americans of Western European descent received most welfare. Just home after having been drafted into WWII and without much means, they were showered with housing, transportation, food and educational assistance supplied by the government and paid for with tax dollars. In time, they moved from housing projects to houses; from schools to jobs; from poverty to players in the first wave of the greatest productivity and prosperity explosion ever. They spring-boarded off of a strong social safety net to become the largest and most influential middle class in human history, responsible for building more industry, commerce, public infrastructure and valued social institutions like schools, parks and hospitals than had ever been amassed before.

Then their kids inherited the most powerful nation on earth and became the taxpayers.

Many of us boomers didn’t need the GI bill, public housing or food stamps. But we all received more free education than anyone in the world from the largest public primary and secondary school systems ever created. With mass literacy we became the largest upper middle class population in human history, bringing the second wave of economic growth to modern America.

Along the way we changed our minds about welfare. As upward mobility and the automobile left urban areas to decay, apathy towards public infrastructure morphed into anti-tax, anti-entitlement supply side conservatism. “I am not going to pay taxes so that black woman in the city can have more babies.”

Since addiction is unlikely without ample supply of the addictive substance, it’s logical to try to shut of supply. This doesn’t change the biology of addiction, it just starves the addict. Breaking the grip of an addiction requires that the addict demand something else, like time free of the vice. Any alcoholic can tell you that.

Had we denied vets a bit of help after the war, we’d not have inherited such prosperity. America needed welfare then to stay whole, and somehow its recipients avoided mass addiction. How?

Having looked into the face of evil as a nation, most Americans of the period recognized the privilege of time on this planet. They put welfare into perspective, treating it as a tool for buying a bit of time, nothing more. They used it like micro-financing during formative years to become things bigger, like workers, teachers and entrepreneurs.

Having bypassed life-affirming experiences like migration, war and living in poverty, we affluent boomers built fences along urban boundaries in fear for our things, leaving impoverished boomers with nothing but welfare. It is impossible to share hope remotely, so welfare became a lifestyle, instead of a life saver.

But we boomers are addicts too, not of welfare but of consumption, which demands cash. Our addiction crosses economic, racial and political lines. Consider that under both parties in the last 25 years, we’ve manipulated our financial markets to flame boomer consumption addiction. Taxation would seem to be an effective supply side solution to the problem, but that would threaten our addiction and is scary. Republicans have made the most of our fear by adopting Reagan’s main talking point that all taxes are bad, and in return, we’ve given Republicans the most power to make policy. When waves of us reach an age too old to work and having spent beyond our means during most of our lives, the last nets, social security and medicare, will be too thin too be useful for anything. This is going to be one wild detox.

Now we’re about two-thirds complete dismantling the American social safety net by starving it. We remain overtly racist and tax averse. The idea of diversity has been marginalized to mean bringing low skilled workers to fill jobs we don’t want. Instead of spreading lessons of opportunity in inclusive neighborhoods, we build gated neighborhoods and leave the old ones to rot. We are bankrupting our public schools and locking the public out of our new schools. We have imploding infrastructure and no hopes of fixing it. We know that most tax dollars go to pay the costs of the military/industrial complex and to debt service, but our conversation about spending invariably reverts to an overheated debate over which weak program to fund or not. The population is aging and will become less productive later in life. And our leaders have been spineless.

Welfare and the taxes collected to support it are not now and never were the root of our problems. Of course, welfare addiction is bad, but it is just a symptom of a dysfunctional society. Contrary to conservative claims, we are not failing because of welfare and taxes, we are failing because we stopped making smart investments in the character and capability of our young people, and promoted only a life of lifelong consumption, and now we can’t quit. We won’t agree to invest in America again until we break the American consumption addiction, which is much more powerful and sinister than the welfare addiction ever was. Taking a lesson from our parents and grandparents, we will do this only when we recognize individually and collectively that time is vastly more important than the things we collect.

I hoped that this would be the mass response to 9/11. But since, we’ve engaged in a war without consequence while consuming as if our resources and our time were infinite. In fact, 9/11 was our best modern opportunity to see the fleeting privilege of life and to stop wasting. I wonder what the next opportunity will look like. Will it have to be a catastrophe? Or can smart leaders shape good policy? 

Taking a lesson from the very best in American history, there are a few basic guidelines that we must agree to before we can move forward.

1.) There is no society without a safety net. This debate isn’t about addiction or entitlements; it is about the agreement we make with each other as citizens that we are better together than apart.

2.) Any safety net we create should invest in the young and spread risk amongst the old, nothing more. A balanced approach acknowledges the special needs of people at different times of life. If our children land in a net, we want them to leap back out with more resources, lessons and tools. Early in life the net is there for the propel the person. Later in life the net is there to defend the society.

3.) There should be no war without a draft. If we share a net, we share responsibility to protect it. When we go to war, it is in defense of our national ideology. If as individuals, we are to have access to the net, as individuals we must hold it up for others. Conversely, when our votes are votes for or against warring, then they mean much more than a term.

Our only entitlement is time. When we reach the shared understanding that our time is a privilege, we will protect it as individuals and in the whole.

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