Not Economics, but Still a Lesson

Economics is about offering people something you find valuable, when they agree, a price is negotiated.  When both sides are OK with the price, a value is established.  In its rawest form, doesn't that describe the sale of a home?  Or even a car purchase.  Some prices are established based on what many people offer, like a candy bar.  It would be inefficient to negotiate the price of candy.  A manufacturer places their price on small items like a candy bar, then convinces a store to carry it.  But ultimately, if the store can't sell it, it lowers the price until it can.  If that price is unreasonable in the store owner's mind, then the store owner will not reinvest in that product, unless the manufacturer also lowers the price to where the store owner can make a reasonable profit.  This happens all the time with large companies and small, across the world.

The headline says, not economics.  And here is where the turn comes in.  Consider the product is a political candidate.  All candidates are trying to convince you to spend your vote on them.  If you as a voter see value in their argument, you vote for them, if not you vote for their opponent, or even refuse to vote.

A few weeks ago, I ran into a site that claimed it was a no call registry for politics (click here for the site).  The First Amendment to the US Constitution protects speech.  Not all speech, but all political speech.  That is why you can't yell 'fire' in a crowded mall.  However, you can say any rotten thing you want about the government or a politician, as long as it is couched in political talk.  That's why Mitt Romney can't sue organizations that malign him.  That's why Barrack Obama can't sue people accusing him of not being a 'native born citizen'.  It's all protected by the Constitution.  Today, I was in a hurry to get to work when my phone rang.  I answered it, the caller ID said anonymous, and low an behold it was a recorded call from a campaign.

The campaigns can ignore the no call lists.  It is a First Amendment right.  But should they?  As we pointed out, if you want a vote, you need to show value.  And also respect.  Should we expect a candidate, who could look at all the no call lists but chooses not to respectful?  Is that a candidate we really want representing us?  Our family owns a small business.  When we looked at phone calls, and trust me we do need more sales, it might have provided some additional sales.  We decided, however, to not use the phone as a selling tool.  Part of our reasoning was that a phone call always interrupts the person being called.  We think that that is why no call lists are so popular.  There are other ways to make contact that are not so interrupting.  Post cards and email are two of the methods we use.  If you open your email, or go to the mail box, you made time to do that.  Granted junk mail is not always what we want to find.  But most of us don't pay for mail trucks or email exchanges, so it is part of the deal if you will to finance these endeavours.  We do finance government through our taxes, and there is where the difference is.

Two suggestions:  First to the campaigns, consider abiding by the no call lists.  And keep in mind that not doing so may back fire.  Second, to the voters.  When you receive a call, write it down.  When election day arrives, look at who ignored your wishes and vote accordingly.  Perhaps next time we can discuss negative ads...

Business and Sales Goals

OK, so this is not what you may have expected from this blog.  It is economically related though, at least in a micro economic way.  I read an article today from Salary.com about a culture of accountability to sales goals.  And while I do agree that goals are a great thing, and there needs to be accountability, I disagree with the article in that accountability must follow goals without deviation.
What are goals?  This is my first area of less than comfortable questions.  Accountability is good, but only as good as the goals that are set.  There are a number of different ways to set goals.  First you can just pick a number, divide by those pursuing that number, and that is their goal.  You could also use the prior year as a template and arbitrarily inflate to get to new goals, you could temper by using the last quarter to adjust goals based on current performance, the point is there are different ways to set goals, but goals are just that, wistful thinking, especially in tough economic times.  But what if you pick the wrong number?  Should those pursuing that goal be responsible, or the person who picked the wrong number?  In my experience, the pursuers are the ones who didn't hit the goal, and they get the blame.

I'm going to use 2 examples to explain what I mean.  The last 2 companies I worked for (and I will not name them) set goals by what the company needed, not taking into account what the economy had to give.  The first was a Telecom company.  This company was merged into a little larger company.  The new company set goals based on what just one side had done prior to the merger.  If you were on the side that was not chosen, there was little chance you would hit those goals.  And over time, by holding the reps accountable, the 'wrong' side was eventually dismissed, primarily for not hitting goals.  Was there accountability?  In a word yes, however, this style of accountability depressed morale, especially on one side of the equation.  When it was apparent that goals were unreasonable, most gave up, or tried to move to the other side where the goals were easier, or looked outside to find other companies to work for. 

Company 2 was in the home furnishing area of the economy.  Past sales growth was strong.  At points in time it was 30% or more year to year growth.  Then came the 2008 recession.  Sales growth went negative across the entire organization, and at one point the company was close to bankruptcy.  And in fact became a target of takeover by a firm that had the reputation of  selling assets to inflate the numbers and then dumping the stock before it fell.  This company set goals prior to the start of the fiscal year.  They did not react and change them, morale fell.  To their credit at one point, management admitted their mistake and sent a bonus to all employees.  But, there were management changes.  The new mid level managers, rather than continue the effort to build morale, used goals as a club.  They picked favorites and adjusted goals lower, reassigning the difference to those that were not in favor.  Morale fell drastically.  They never explained why some were more accountable than others.  This company seems to be thriving again, but the morale still remains somewhat low, so how can they ever achieve the great growth they had in prior years?

A lot of good employees were released because of the inability of these organizations to react to macro economic trends.  Not once did the goal setters get told to rethink their goals.  In tough times, morale is all that most organizations have, and to lose that is a huge disadvantage.

We should all set goals in our lives.  Goals, if properly set and managed are a great tool to personal and professional growth.  These goals need to be realistic and attainable, one part that seems to be left out of discussions on goals as tools for managers.  And when those goals seem to get hit hard by bad economic times, adjustments need to be swift to make goals attainable.

Set your own goals and push to acheive them, you will get closer than if you do not set goals.  Goals should push the talents, but should not be a club.

Hey America, It's not all Bad

As I was looking for Economic news on the net, I came across a story from Great Britain's Economist publication.  Why we don't see more stories like this from the likes of CNN, Fox News, MSNBC, and the like is beyond me.  The economy of any country relies on the emotional well being of its people.  As was said earlier in another blog, if the American people feel confident in the economy, that is the first and best step towards better times.  There is money in our economy, at the present time it is not being productive.

The Economist's story is here:  http://www.economist.com/node/21558591 and is well worth the read.  It starts out telling of a building boom in Asia, China in particular.  It seems many of the new sky scrapers rising into the sky in China are designed and engineered by American firms.  These firms are making money from dealings with China.  And while China is a huge competitor in our economy for consumer dollars, they are not yet able to hit the higher level of engineering and design.  That's where we Americans can hang our hope.

The article goes on to talk about our banks.  Now, think hard, what news have you heard here in the states about our banks?  Is your impression that they are all teetering on the brink?  That all the bad mortgages and debt is close to sinking them?  Not according to this story.  Our banks were effectively bailed out, and have recapitalized nicely.  Especially when compared to Europe.  Another good sign for our economy.  Our banks will soon be able to help finance the recovery, which is eminently smarter than the government's stimulus plans.  Just one problem, it doesn't feed into the socialists, especially in the media, plan to socialize America. 

Did you know that we as members of the economy have generally paid down debt?  That now 43% of our economic growth is coming from exports?  But even at that, all is not well in our economy.  Unemployment is too high, and new jobs are not being created at a sufficient pace.  Our stock Market is on the roller coaster, reacting insanely to any news good or bad, rather than looking at individual listings and determining if they are well run companies with minimal chance of failure, and then investing in them to allow growth to occur.  Again, something government can not do efficiently.

Did you know that China is now our third largest export market?  Yet all we hear is China bashing, and to some degree it is worth watching.  China is not a perfect friend, they rattle their sabres over Taiwan, and I believe are building their military forces.  The question is if that build up is defensive.  The political system in China is under stress, similar to the way the old Soviet Union's government was.  To this point they have remained through force and oppression, but that will eventually change.  The Chinese people will ultimately win out and there will be real political change. 

So there is reason to be optimistic with the American economy.  And do you know why?  We the People determine where this country goes.  Both of our major parties are only along for the ride.  And both seem to be pandering for more of what they siphon off our economy to line their own pockets.  But like the Soviet Union, and like China, and like any other tyrannical country in the world, the people of America will make things happen, and traditionally that means big things and a robust economy.  Ignore the news, ignore the politicians dreary outlook, and go spend something for something that makes you happy.  And we WILL show them.

For Every Action...

Economics is often described as a science.  In science we have the ability to run experiments, keeping variables the same, then the same outcome should happen.  There are certain physical laws that make that happen.  When, for instance, you touch a lit match to paper, it will burn every single time.  Or if you drop a rock off a building it will fall every single time.  That is science.  There is another form of science, one that studies reactions made when there is a choice.  Rats in a maze for example.  But the rat will have a choice, and will not always choose the correct path.

The same is true of Economics.  Because economics studies human behavior when it comes to money, it is important to note that they have a choice.  The choice they make will inevitably equate to an economic result.  Assume a man takes his money and places it under his mattress, because he is afraid of bad times ahead, and stops trusting banks.  That money leaves the economy.  The result is that money supply decreases which may affect another person from getting a loan to buy a washer.  The people who manufacture the washer don't sell that washer, as a result they don't have to replace the inventory and lay off a worker.  In this scenario, the fear of bad times results in bad times.

Now let's assume the man decides that banks are OK, so he deposits his money in a bank.  Banks make money from loans.  The bank loans money to the other man to buy his washer, the company needs to replace that inventory so the keep the worker on the payroll.  This result is much better.  The economy grows.

But why would this one person decide to bank his money, or hoard it?  It is his choice after all.  How does he arrive at that choice?  Do we not listen and watch what goes on around us?  Do we at least listen to a few minutes of news per day?  Or talk at the water cooler? Or visit with friends and family?  The reason this person would hoard his money is if he is afraid of total economic collapse, he might turn it into precious metals or jewels, but he will not place it where it can help the economy.  This is one reason that the Government made owning precious metals illegal during the Great Depression.  To force people to invest in more productive things.  But it still relies on choice.  Perhaps it was real estate or jewelry instead of savings and investment.  There are always choices, and our guy will always choose what he believes is in his best interest.

That is why the public psyche, is so important.  News media can drag the economy, when they report only bad news.  Government can drag the economy when they dwell on the negative.  Stimulus's will not work, because after the first layer, that money goes to the processor's choice, perhaps under the mattress.  Politicians in particular, need to accent the positive.  Like FDR in the 1930's or Ronald Reagan in the 1980's.  Both set the economy booming, and yet they would be considered political opposites.  But both caused the psyche of the nation to improve, taking the money from under the mattress and letting it be productive in the general economy.

In the present, we have a problem.  Media reports disaster is coming in Europe, oh and China's economy is slowing down, and oh unemployment is at 8.3%, and, and, and...

The Speaker of the House is busy blaming the President, who is busy blaming his predecessor, or Congress.  Not exactly a positive message.  Do they know what they are doing?  If the do, they deserve to lose their jobs, for being complicit.  If the don't, they deserve to lose their jobs for being incompetent.  Or at least that's my opinion...