I was at the in-laws' last night and was watching a show with my father-in-law on the History Channel. To say my father-in-law is conservative is like saying the sun is hot. The show we were watching was a panel discussion where a group of futurists discussed the impending decline and fall of the United States. A comment was made by one of the panelists that there are poor people in the Philippines who are happy despite living in abject poverty and without all of the material stuff we enjoy as Americans. My father-in-law didn't think this was possible, that the poor could be happy.
The argument didn't surprise me. The need and the desire for more is taught to American children where it's probably not in the Philippines. In most cultures, once Maslow's Hierarchy is met, you can and should be happy. But satisfaction with having your basic needs met is anathema to capitalism. Not much money is made when people are happy with what they've got.
Particularly in the boom days of the '80s and '90s, Wall Street demanded growth. Growth was the model for everything. The idea that a company could reach some point where it was like a car on cruise control doing 70 on the interstate, was obsolete. The nice annual return, happy workforce, consistent payout of dividends model on which our economy had been based for decades was a dinosaur. No matter the business model, the ultimate goal was growth and dominance of market share.
Of course, this line of thinking is still in vogue. The new American economic model is a scorched earth policy of unabated greed and desire for more, and more, and more. To be satisfied is to be lazy. The quest is for the IPO and massive bonuses and mcmansions. The fact that we live in a world of finite resources and finite capital and finite potential is completely disregarded. To acknowledge the finite is to point out that the emperor is naked. For the new American economic model to hold, everybody has to believe.
I remember vividly in 2000 when Krispy Kreme, the Southern doughnut making institution, had its IPO. The boss I had at the time, owner through inheritance of a small trucking company, was spreading the word that it would be huge and, indeed, it was. The problem, I pointed out at the time, was that Krispy Kreme shouldn't be doing an IPO. It didn't make sense to me that a good steady business would risk everything to try to make itself into a McDonald's of doughnuts.
The trucking company owner was one of those guys who is wealthy because of the hard work of his father. In his mind, however, he was a self-made man of the "pull yourself up by your own bootstraps" variety. Very Republican and all that that entails, he was striving for the type of growth in his own company I'm discussing here. Taking out loans to expand the fleet and aggressively taking on old and established competitors by undercutting their prices at a loss, he was on a sort of business jihad. Of course I got caught up in the downsizing when the chickens came home to roost on his idiocy. Topic for a future blog: this is the type of guy who will benefit from the new estate tax cuts.
Krispy Kreme, though, now that's a topic dear to my heart and the hearts of Southerners for generations. The kitsch and the familiarity of the "Hot Doughnuts" signs are icons of my youth. Most school children had to do a Krispy Kreme sale at some point to raise money for a field trip or other project. You'd have boxes of the classic glazed doughnut and you'd stand at busy intersections and people would buy you out in an hour. My grandmother loved to take the old doughnuts, cut them in half, and fry them in a pan of butter. Luther Vandross, also known as a singer, was the inventor of the Luther. The Luther is a Krispy Kreme glazed doughnut, cut in half and put on a grill cut side down, and used as a bun for a bacon cheeseburger. Believe me; it works!
Caught up in the market bubble of the late '90s, Krispy Kreme began its ill-fated romance with the growth economy. They wanted those doughnuts to be everywhere. They wanted stores all over the world and their doughnuts sold in other retail locations, gas stations, WalMarts, etc. Of course, now, Krispy Kreme stock is worth about $7 a share and a great many stores around the country have closed.
It never made sense to me to sell Krispy Kremes outside of their stores because it was like the company competing with itself. It's the same thing as Starbucks wanting to open locations every other block in addition to having Starbucks coffees in the refrigerated section of your local convenience store or being able to buy frozen White Castle hamburgers at my WalMart 500 miles from the closest White Castle restaurant. It all makes sense in some delusional PowerPoint presentation at some point. There are plenty of graphs and pie charts and focus group reports that showed somebody with money why it couldn't fail. Ultimately, it doesn't really make sense though.
It's the same thing I used to feel when I'd hear about housing starts as an economic barometer while I had just driven by a whole new subdivision of finished or half-finished single family dwellings uninhabited and for sale. At some point you have to realize that what you have is enough. New homes should be built as they're needed not on speculation. Krispy Kreme was a profitable and established business that had no need to expand out of the Southeast except to satisfy a belief in a bankrupt economic policy, the Zeitgeist of the boom market.
I'll probably be watching "The Social Network" this evening. The pervasiveness of Facebook is astounding and the DVD release of the movie version of its founding is surely some sort of tipping point. Company founder, Mark Zuckerberg, is Time magazine's man of the year. Jump the shark anybody? Goldman Sachs, those engineers of unfounded market speculation, recently valued Facebook at $50 billion. That basically means it's a more valuable company than Boeing; of course that's all on some PowerPoint presentation somewhere and I guess we're challenged to deny its validity without having the bonus-mad market analysts at our disposal that Goldman has to counter our claim.
I remember well when Facebook was the new thing. The band I was in at the time had done a lot of work getting set up on the, then, new thing MySpace. MySpace was a perfect vehicle for promoting bands. Then I began to see reports that MySpace was basically dead and was only being used by black and Hispanic kids. The portal of choice for white kids, our demographic basically, was this thing called Facebook. I remember checking it out and noting how much it sucked. It looked ugly, it wasn't intuitive, and there was nowhere to post my band's songs. Oh yeah, I use Facebook now; it's where all my friends go to connect with one another and share their thoughts, pics, video clips, etc. And it still lacks so many things that seem so obvious to me. If I want to find a post from a certain date I have to scroll and scroll and scroll until I find it, no searching posts by date. That's a small quibble but just one of many.
I guess envisioning and implementing Facebook's inevitable replacement would make me a billionaire. Yeah, I used the word inevitable. Mark Zuckerberg, has fought off the prodding to do an IPO, relying on private investment to this point. Unlike Google, another site whose popularity confounds me, Mark Zuckerberg seems to be more interested in the slow and steady growth of his company via its own inertia, aka the old business model.
I have no doubt in my mind that, in five years' time, Facebook will be on the way out. People are fickle and they want to be on board with the next new thing. It won't be Twitter or any of the dozens of other social networking apps and websites out there currently. Things like Facebook are replaced by quantum shifts but quantum shifts are always inevitable. All things related to entertainment and information are finite. The point is lost, however, on Wall Street. Like every bubble in the past, we'll look back on Goldman's Facebook valuation and easily identify the error in their thinking. It just happens to be obvious to some of us right now.
Until more people begin to put down the Kool-Aid, worry more about the long-term economic viability of our country than about making a quick dollar, the decline will only hasten. In my jaded world view, I honestly think the Goldman people are fully aware of the lie. I think they come up with valuations that defy logic in order to push companies like Facebook to an IPO in which Goldman's largest investors will make huge bank and the company being pushed will be killed off after the profits have been taken.
Unfortunately, Wall Street and its boom mentality goes on apace despite the hope held by people like me that Obama would provide some meaningful regulation to bring it in line with reality. That didn't happen and it looks like it won't. In fact, in a system where the potentially regulated are in charge, there is little hope for anything better.
No comments:
Post a Comment