Posts

Greed Doesn’t Drive Wall Street

/in /by

Day 3 of 21 days with Chuck’s new book.

Greed did not drive the giant Industrialists of the 1800s, nor does it drive companies we love to hate on Wall Street today. It’s something quite different.

As with all empire builders who passed before them, it is about power; money is just a new measure of power. In the Industrial Age, for the first time in history, you could build a fiefdom alongside a government that would not send armies to destroy you, but actually protect your right to do so.

Power To The Few
There is little doubt that most of the big Industrialists, when they were still small, likely ignored some moral or ethical boundaries to begin to accumulate wealth. Greed drives them at first, but once they have experienced wealth, the desire to be powerful is the unique and much rarer driving force behind those few people who want to dominate and crush the competition.

Bernie Madoff may have been greedy when he was a bit player on Wall Street, but very shortly it became about being powerful, well known, and highly influential in elite circles. Giant banks may start out focused on accumulating wealth, but that is quickly replaced with a focus on power and domination. After someone has significantly more than they need, it becomes about power. And power requires winning, beating the other guy.

Kings and Kingpins
The basic motivations of feudal lords, politicians and 21st century Industrialists are identical. For all of them the most intoxicating motivation is to be able to control the lives of other people, which gives them power, control, and prestige. The feudal lord accumulates armies, the politician accumulates votes and the Industrialist accumulates money, all with the same motive – domination of their respective worlds and elimination of potential threats.

Cornelius Vanderbilt was a feudal lord ruling over a fiefdom. He was so powerful he was able to destroy the entire railroad industry by shutting down the Albany bridge, the only rail bridge into New York City, which he owned. Winning at all costs, and the power that came from being on top, was the intoxicating way of life for the Industrialist. And it still is for many business people and politicians who make up the 21st century version of the Industrialist.

Sumner Redstone, the American media magnate, summed up the motivation of the 21st century Industrialists we love to hate, “They don’t think in terms of money, they think in terms of winning. Not some times. Every time.”

You see the same transition from greed to power in criminals. Small criminals may be greedy, but big criminals are motivated by power. When the Colombian super-cartel was broken up in 2012, the top three leaders, who were worth hundreds of millions each, were all found living in modest city apartments, working out of cafes, driving regular cars, and essentially living regular middle class lives. Living modestly was what made it hard to find them. When asked why they had continued selling drugs for so many years when they couldn’t spend the money, one of them replied simply, “It was for the power.”

Power Through Philanthropy
Virtually all of the big Industrialists of the 1800s gave away staggering sums of money in their later years. But even in their philanthropy they sought to crush the other guy and build a bigger library, concert hall or museum. If they were driven by greed they would have kept their money. But a building with their name on it would continue to give them prestige and a form of power even after death, and help prove to future generations that they won. That was worth more than money in the bank. Power always trumps greed.

Which Big Do You Love?
Big loves big. They have to. Big government and big business may not be fully in synch, but they are co-dependent and DO love key things about each other that will help them both remain in power. Most people find themselves rooting for one Big or the other, without realizing that decades ago both Bigs lost touch with everything small and local.

In the final analysis, both Bigs have a cozy, symbiotic relationship where donations, cronyism, favors, free trips, power, and money are flying in both directions regardless of party affiliation. They understand clearly how much they need each other in order to stay in power.

Small Is Becoming Powerful
But Big is in trouble. The Participation Age, and the ability to share information easily via the internet, is exposing the power-grabbing practices of the Bigs, at a time where returning to small and local community is becoming one of our highest values. In the coming decade, Big will be less and less necessary in our lives, and the advantage will go to the small and local businesses that are in touch with the “small” guy on the street.

Stop Rooting for the Bigs
But we will accelerate the process when we stop whining about the greed of the Bigs, and focus instead on requiring a level playing field that does not concentrate power in the hands of a few and does not favor the Bigs over the Smalls.

Do you love one Big (business or government) more than the other, because you think it will be better for you? Think again. The Bigs aren’t working to help the Smalls, but to continue to increase their own power.

This is a summary of a chapter from Chuck’s new book, “Why Employees Are ALWAYS a Bad Idea (And Other Business Diseases of the Industrial Age)”. Click here to pre-order this new ground breaking book at a discount on IndieGoGo.com until July 28.

The Problem with Big

/in /by

Day 2 of 21 days with Chuck’s new book.

Jerry Garcia said, “Too much of anything, is just enough.” But “Big” is one of the core business diseases of the Industrial Age; a very new business solution devised by Industrialists to serve themselves. Big has big problems that Small will never experience.

It took a long time for us to fall in love with Big, in the 1970s, almost at the very end of the Industrial Age. But since then, we’ve become addicted to big. We can’t help ourselves. Big “anything” is just too cool for school.

Why is Big so Big Now?
Big Government has been around a long time, but Big Business as a dominant force is brand spanking new. There are just 167 companies in the world older than five hundred years, and only one of them has more than 100 employees. The rest are Smalls. After thousands of years of running economies on the backs of the Smalls, we now just assume Big is the best and only way to go.

The Problem With Big
Big has special problems that it doesn’t share with Small. Whether it is business, government, dinosaurs, hurricanes, or snowstorms; the really big ones have two intrinsic problems that Small doesn’t have:

1) The bigger they are, the more problems their complexity creates, for themselves and the world around them.

2) The bigger they are, the greater impact their mistakes and problems have on themselves and the world around them.

In 2008, one giant financial institution, Lehman Brothers, collapsed, which created a domino effect, threatening the entire banking system. As a result, in 2009, and for almost two years after, the U.S. economy was stunningly rated by the National Security Agency as the highest threat to U.S. national security, higher than terrorism or any other outside threat. The United States addiction to Big had become our own worst enemy.

Big is Bigger Than Ever
How did the two Bigs (business and government) respond to this internal threat to our nation’s security? Big Government gifted hundreds of billions of dollars to a few giant banks without so much as an I.O.U. Free money with no strings attached. Big government had to do it. Big business was holding the government and the entire country hostage by sheer virtue of its size. The big banks are now all bigger than they were when they were “too big to fail.”

What did the giant banks do with the bailout gift? They put it in their pocket and stopped lending to small business. Small business in America was crippled by this one act which went largely unreported by big media, and is still the largest underlying cause of the slow recovery.

Big Impact
As this shows, the reach of bad decisions by the Bigs can be devastating. When Big does something stupid like Lehman Brothers, the impact is global. When Small does something stupid or intentionally detrimental, it’s no less acceptable, but the scope of the damage is localized and controlled. It’s the difference between the mistaken detonation of a hand grenade or a nuclear bomb. Both are bad, but only one is global in scale.

Big Has a “Get Out of Jail Free” Card
And too often, when Bigs get stupid, they get a pass. In 2012 the U.S. Justice Department found that HSBC, one of the world’s three largest banks, had “spent years committing serious crimes”, regularly laundering money for terrorists and drug cartels. But the Justice Department decided HSBC was “too important to subject them to disruptions”, and shielded them from any criminal prosecution.

Micro-solutions for Micro-problems
Another problem with Big is that it creates macro solutions for micro problems. Even with the best of intentions it is simply too big a task to ask macro-entities to solve local problems. The problem is not the systems, but the size of the systems; the size of business, size of government and the resulting accumulation of power and decision-making into those few hands.

The reason size is a problem is simple. The old adage is that “all politics is local.” The same is true for problems – “All problems are local.” Big never solves local problems.

Size Matters
Does small always work better than big? No. It is easy to find both local businesses and local governments that make self-preserving decisions that aren’t in the best interest of their constituency, just like the Bigs. But because they are small and local, the negative affects are never as damaging.

Returning to local government and local business for answers to our local problems would push as many decisions down the food chain as possible. This is difficult if not impossible for both national politicians and big business leaders to accept, because they would lose control over their own macro-power.

There is a place for both Big Business and Big Government, but experience says we would be better off, and certainly safer as a nation with less of both.

Tomorrow we’ll discuss why greed doesn’t drive Wall Street; it’s something much bigger.

This is a summary of a chapter from Chuck’s new book, “Why Employees Are ALWAYS a Bad Idea (And Other Business Diseases of the Industrial Age)”. Click here to pre-order this new ground breaking book at a discount on IndieGoGo.com until July 28.

Why Giant Corporation, Inc. doesn’t create jobs

/in /by

And why Smallnand Local Business Does.

We’re addicted to big, and part of that addiction is the assumption that big corporations are the answer to job creation. But if jobs are created, it’s going to be almost exclusively by small and local businesses. Here’s why.

In July 2010, The Kauffman Foundation for entrepreneurship released the findings of their research on job growth, titled, The Importance of Startups in Job Creation. They reported a stunning fact:

“All net job growth in the United States comes from firms less than one year old, formally defined as startups.

All other ages of firms, including companies in their first full years of existence up to firms established two centuries ago, are net job destroyers, losing 1 million jobs net combined per year.

Startups (businesses under one year old) aren’t everything when it comes to job growth. They’re the only thing.”

Only Small and Local Business Creates Jobs
This proves what many have said for decades, that small and local business is the engine of job creation in America. 98% of all companies using an Employee Identification Number (EIN) have 19 or fewer employees. If you include companies using the owner’s Social Security Number instead of an EIN, it’s closer to 99.9%.

Approximately 600,000 new businesses are established each year with EIN numbers, and probably a million more with the owner using their Social Security number. 99.9% of EIN and SSN startups will always be small, and since all net new job creation is in the first year of business, we should be doing everything we can to promote the establishment of small and local businesses.

Local Government Should Court Small Businesses, Not Big
The Kauffman report goes on to say that local governments should never court giant corporations to their towns because they are net job destroyers and will do more damage than good over their life cycle. The emphasis should be on encouraging new startups.

If we want job growth in America, we need to focus on helping small and local business owners in their first year of business. But that’s not something the government or big business wants to do.

Startup America is not for Startups
Startup America is a White House initiative that includes a venture capitalist based corporate counterpart, Startup America Partnership. Although it uses the word “startup” in its title, it is not about startups at all. Their stated focus is existing 3-12 year old (not startup) businesses, what they call “speedups”, that want to become giant corporations.

Scott Case, the CEO of Startup America, the White House press releases, and the mission statement of Startup America all say repeatedly that Startup America is not focused on small business in any way. Scott Case says Startup America is focused solely on “giant businesses that just haven’t scaled yet.” And they go on to describe them as companies that are up to 12 years old that want to be giant corporations. These are not startups by any definition.

Sadly, Startup America and Case have a demeaning view of small business owners who actually create the jobs. Case says, “Small business owners, if they fail at their first attempt, they’ll immediately go take a job in their industry.” After saying they’ll fold like a cheap suit when under pressure, he also labels them all “mom and pops”, a belittling description.

This contempt and disregard for small business owners isn’t new. Politicians on both the left and the right are largely addicted to big and have no regard for the small and local businesses that are the engine of job creation in America. No one in Washington on either side is a true advocate for the small and local business owner.

It is always “big” (big business and/or big government) that gets us into economic messes, and small and local businesses and local government who get us out of them. Kauffman has put the full weight of their research behind this fact.

Small is Bigger than Big
Small and local business is the engine of our economy and the source of 99% of job creation. It’s too bad that both sides in Washington are addicted to big, because the biggest thing we have in America to solve our problems is 28 million small businesses.

Why small business is fed up with government

/in /by

Both sides are addicted to Big.

What really grinds the gears of small business owners is the near-complete inattention by lawmakers on who creates jobs.

So said Kimble Fletcher Ainslie in a Cato Institute article from December 20, 2001 titled “Bush Ignores Small Business.”

Eight years later under a different president, Catherine Clifford’s article in CNNMoney.com on September 30, 2009 continued the criticism of lawmakers ignoring small business:

Business owners really bring out the pitchforks when they consider the speed with which billions of dollars were distributed to large Wall Street firms and banks. That is what sticks in the small business owner’s throat more than anything.

Banks received $700 billion dollars in handouts in October 2008, with almost no regulations or restrictions. In February 2009, big businesses and big state governments received $787 billion, an incomprehensible $1.5 trillion total dollars. General Motors alone received $30 billion dollars when they would not have qualified for a credit card.

The top job provider in the U.S. economy is businesses under 10 employees. Those with 11-19 employees are second. Seventy-nine percent (79%) of all businesses in America have less than 10 employees.

In February 2009 while big businesses and big state governments were receiving $787 billion, the politicians threw a $255 million bone to small businesses in the form of the SBA ARC loan program, providing a potential $35,000 for a business that could get one. That’s 2/100th of one percent of the $1.5 trillion dedicated to the single largest job growth sector in our economy. While giant banks and corporations got handouts and bailouts many times in just a few days, the first ARC loan didn’t get processed until June 2009, five months later. By December 2009, only 45% of that tiny amount had been loaned.

Adding insult to injury, in December 2009, Republican Senator Olympia Snowe, a self-proclaimed small business advocate, introduced legislation to kill the program and return the remaining 55% back to the Treasury immediately.

Small business owners are not fed up with the government because they don’t get handouts. They are fed up with the symbiotic, parasitic relationship between politicians, big business and big banks. It’s hard enough to grow a small business. Swimming upstream against the constant deluge of advantages, handouts, bailouts, special loan programs and preferential treatment given to big businesses is the real rub.

The mis-named Small Business Administration is of no help. When the SBA was created in 1953 the big business lobby got their political friends to define small business as any business with under 500 employees, which is 99.94% of all businesses in America (only 17,000 of 28 million are larger than 500 employees). It’s like calling everyone under 7′ tall “short”. So it’s no surprise that almost all of the SBA’s attention is on businesses that are 6-7′ tall. Businesses under 5′ 4″ aren’t on the radar. So even with the SBA, true small businesses are on the outside looking in.

In 2009 Australia passed the Fair Work Act, legally defining a small business as having fewer than 15 employees. A similar law in the U.S. would be a good start. Then small business needs the creation of a real SBA, not so they can get handouts, too, but so they have a seat at the table to level out what has been an un-level playing field for decades.

The big business-big government parasitic relationship has been exposed by this last recession. It’s time to put an end to all the patronage that goes between the two of them, all to the detriment of true small businesses.

Big is Not Small

/in /by

Help stop the SBA madness.

I’ve never used my blog to directly advocate for an issue, but the SBA’s long-term focus on big business has moved from absurd to something there is no word for. I don’t want more handouts. I just want them to stop giving them to big businesses, and expanding to include even more big businesses to give handouts to. Help us stop it.

The SBA lost its way at its inception in 1953 when politicians bowing to big business interests defined “small” as any business with fewer than 500 employees. That is 99.9% of all businesses, a ludicrous and meaningless description of small. This happened because big businesses lobbying their politician wanted to make sure they didn’t get left out of the handouts. As a result, the SBA focuses almost all of its attention on larger businesses from 100-500 employees. Only 17,000 of the 28 million businesses don’t qualify!

They are now expanding the definition to include 9,450 of those 17,000, because large businesses with 400-500+ employees are once again growing huge and don’t want to be left out of the handouts that were set up to encourage small businesses to compete against the Bigs.

We can stop this nonsense. What can you do? Go to the SBA site here and submit the following objection, or your own. They must post them publicly and enough complaints will get their attention and require a response.

Rasmussen (a polling company) says the traditional three classes in America – rich, middle class and poor, have now been replaced by only two – The Ruling Elite, and everyone else. We have become a nation ruled by the Bigs who have completely lost touch with who they exist to serve.

But in the Participation Age we are now in, you can make a difference. Go to the SBA site and let them know a “small” business has fewer than 20 employees, and to stop expanding to serve their big business cronies.

Copy the following, fill in the contact info on the SBA site here, and paste the following or your own objection. Let’s begin to create a voice for small business at the table of the Bigs.

COPY THE FOLLOWING:

The existing SBA definition of “small” includes 28 million out of 28 million businesses (only 17,000 are left out). It’s like saying all people less than 7’ tall are “short”. Your continuing expansions move it to 7 1/2’ tall people.

How can you claim to serve small business when you include 99.9% of all businesses, and want to increase that to 99.95%? No understanding of “small” justifies these increases, and only goes to demonstrate that the SBA does not have a focus on small business.

In 2009 Australia passed the Fair Trade Act that formally defined “small” as “under 15 employees”. Even that would still include over 80% of all businesses in America, but would be a much more realistic definition of “small”.

I hereby formally request that you defend your definition of “small” against the commonly held understanding of the word “small”, and either
a) Reduce the standards by nearly 2500% (from 500 employees to 20) to reflect a realistic understanding of small, or
b) Rename yourself the Mid-to-Large Size Business Administration (MLSBA).

See the Miriam Webster definition of “small”:
1 having comparatively little size or slight dimensions
2 a: minor in influence, power, or rank b : operating on a limited scale
3 lacking in strength – a small voice
4 a: little or close to zero in an objectively measurable aspect (as quantity) b: made up of few or little units

  1. How does “comparatively little” describe 99.9% of all businesses?
  2. How does 99.9% reflect “minor in influence, power or rank?
  3. How is 100-500 employees “lacking in strength” when compared to the 80%+ businesses with fewer than 10-15 employees?
  4. How is 28 million out of 28 million “little or close to zero”, or “made up of few or little units”?

I look forward to your formal public reply.

Gandhi – “Anyone who thinks they are too small to make a difference has never gone to bed with a mosquito”.

Thanks for making a difference!

Why We’re Leaving Our Giant Bank

/in /by

And why we didn’t do it earlier. UPDATED Jan 2013

Wells Fargo is likely the “great bank” among the big ones, with the highest integrity and the lowest tolerance for bad banking practices among the bigs. But if my experience is typical as I believe it is, that should scare us all.

In early 2009 Wells Fargo took away our business credit line without so much as a letter to tell us why – it just vanished from our online banking screen one night. They did this to every single small business account in America without regard to the viability of the business. The $25 billion in 2008 Federal bailouts to WF never trickled down from Wells to their clients. I personally know of many very healthy businesses that were destroyed by this single act, and tens of thousands were damaged for years after because of it.

IT’S ALL ABOUT THE BANK
When it happened, we showed our local Wells Fargo branch manager our perfect credit and they said, “Frankly, we took away everyone’s business lines with no regard for their credit. We just had to make our own balance sheets look better.” That honest Wells Fargo manager said their credit requirements had tightened to the point of being “ridiculous.” She’s no longer there.

Many business owners switched to using their personal credit lines and had their interest rates jacked up right AFTER using them, not before. We did this to see what would happen and sure enough, within a week our rate was jacked, too. All while Wells Fargo was receiving the lowest interest rates from the Feds in history and had lined their pockets with $25 billion in free bailout money that had no strings attached to it.

This is the great bank, the good one amongst all the bad ones. If this lack of integrity is how good one acts, what are the bad ones like?

OUTTA HERE
In 2010 after more incidences of bad customer service, we told our Branch Manager we were leaving and were looking for a small local bank that wouldn’t make macro-decisions that ignored their customers. We also told them we would wait until our revenue was significant enough to make Wells Fargo stand up and take notice.

UPDATE – JANUARY 2013
We set up our one international business with a local bank in early 2012, not Wells Fargo. But our main focus is Crankset Group, which grew 392% from 2008 to Dec 2012, which has been with Wells for six years. They requested a meeting in December to introduce us to four business bankers they now want us to work with, and told us we didn’t have to interact with the regular branch folks anymore. We’re special now that we’re big enough.

Our growth and the complex merchant account changover required is making it hard to invest time in changing banks. But we’re committed to doing it before the end of 2013. We are thinking of hiring a marching band when we do. And when we meet with Wells Fargo to close out, we hope they’ll learn from our experience, but based on their disregard for us as a client until we were “big”, we’re not holding our breath.

Do the small banks do better? Our experience with our other business is that they are much more better at paying attention and meeting our needs. And much less expensive.

2013 – MORE FEES – CHARGING FOR THE LOLLIPOP?
Pert of the 2013 update – we got a form letter from Wells Fargo yesterday, January 3, stating that they will now be charging their clients for cash deposits. They are now charging you to put cash deposits in their bank so they can make interest off of it. Mind-boggling, but not surprising.

In the same letter they outlined three other new fees, including charging their clients for transfers from Wells Fargo savings to Wells Fargo checking – $15 a pop to do that. My community bank will transfer to another unrelated bank anywhere in America for $7.50 and sometimes nothing. Watch closely – Wells is taking their cues from the airline industry. Next they’ll be charging to use their pen, and then for the lollipop.

GO LOCAL
Our lesson? Go local whenever possible. It’s not a panacea, but it can never be worse and more than likely a local bank, as with any local business owner, is more likely to pay attention because they live there, not in some skyscraper 1,000 miles away.

What’s been your experience with big banks/big business vs. small banks/businesses?