America vs. Small Business (1-0)
About Chris
Chris Lyman is the Founder and Chairman of the Board at Fonality. Fonality creates innovative and affordable phone systems for small and medium businesses. Our products include PBXtra, trixbox Pro, and trixbox CE.
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America vs. Small Business (1-0)
The rantings of a serial entrepreneur as he wins, loses, and doesn't pull any punches in describing both...
America vs. Small Business (1-0)
OK, this is a bit off my usual business bent, but I am, well, bent. What’s got me all bendy? It stems from the fact that I now live in a country with socialized insurance. Heck, I can't even get socialized medicine for my workforce, lol.
Actually, it’s not the insurance bail-out in particular I care about. It’s *all* of these damn bail-outs. I know, I know… many of you had AIG insurance so you avoided [insert personal crisis].
I know, I know…if we didn’t bail out the airlines after 9/11 [insert portend of doom and gloom].
I know, I know… if we didn't bail these behemoths out, our economy would have [picture of Chinese army pouring down Main Street, USA].
I get it, people.
I get that these bail-outs are great short term fixes to prevent nasty slumps on the “Street” and to protect our “Nation’s Interest”. (BTW, is there a secret room somewhere where a council of wizened druids decide exactly what our nation finds “interesting?”)
So, yah, something about all of this has been bugging me for a few days and, finally, while at lunch with some of my beloved engineers the other day; I was able to put my finger on it. The convo went something like this:
Chris to engineer: “So, what do you think of the bail-outs this week?”
Engineer: “I dunno, when can we get bailed out?”
Me: “When we get to $10B in sales.”
Then it struck me. These bail-outs are so ANTI-innovation and so pro-corporatism. Anyone will tell you that the strength of the American economy was founded on the innovation, guts, and entrepreneurialism of the small business owner. Look at Microsoft and Google - they were both small businesses not too long ago. But, by bailing out these big guys it provides a strong incentive for them to take stupid risks and have the government carry the note on the downside. If your smaller, more nimble, more innovative companies (that’s you, Dear Reader) can’t take those same risks, then well, tough noogies. Score a competitive advantage for the big boys — upside with no downside. Whoopee!
I realize that not every huge company gets bailed out. Lehman Brothers, for instance, has gone the way of the dodo bird. The truth is: you have to be both huge *and* considered of strategic import (infrastructure/economy/etc). But the innovation-stifling point holds:
You can bet they would bail out AT&T and not Vonage. Vonage is the innovator here.
They did bail out the airlines after 9/11. But, my buddy’s small airline went bankrupt recently. He was an innovator, with a great concept of affordable business-class non-stops from NYC to London. *poof* gone.
Isn’t innovation the pith of American DNA and shouldn’t our government stimulate and not squelch it?
What exactly *does* it say to our supposedly beloved SMB (small and medium sized business) when our government bails out only the humongous companies? It doesn’t say anything. Instead it gives them the finger. Well, three fingers:
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It provides a safety net for just the big boys. As stated earlier, this allows them to take greater risks because daddy will be there to bail them out.
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It rewards bad behavior by removing the consequences for poor planning. This will always create broken systems.
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It makes small business tax payer dollars cover their bigger competitors while they get no same coverage on their own business. Huh?
As an advocate of small business innovation, it just stinks. So, I ask the small business owner, besides SBA loans and the like, what other things could our gov’t due to bail you out and level this tilting playing field?
--
Chris Lyman
Fonality CEO & Janitor
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How about a $1:$1 match on
How about a $1:$1 match on group health employer contributions?
Stifling innovation is a
Stifling innovation is a nasty by-product of rewarding bad behavior, it's clearly not the intent of these bailouts.
The phrase "too big to fail" has been used liberally to describe the apparent necessity of this mass dilution of U.S. currency. I agree that it's a short-term fix that encourages more bad behavior and doesn't address our economy's growing addiction to real-estate-backed credit.
So what's the real solution?
In the short term, oversight. Any organization that might be deemed "too big to fail" presents a hazard to our national interest, because they may require a billion-dollar bailout from taxpayers to avoid an ugly and painful collapse. Subprime lending wasn't a surprise -- it grew for years while the Fed supplied lower and lower interest rates, and the government showed little concern until it imploded. We're seeing what now, 10,000 foreclosures per day? Any organization that can have that much impact on the U.S. economy should be watched very closely, and should be more transparent in their dealings.
How about some innovative thinking about regulation and oversight, too? Rather than more policies and bureaucrats, consider dividing large integrated businesses into smaller, distributed entities. They'll cost consumers more in lost scale, but they'll be small enough to fail without a bailout -- and thus have an incentive to behave.
In the long term, we need to reign in our reliance on credit as a fuel for the economy. I'm not railing for a return to the gold standard, but I believe the U.S. is intoxicated with debt and needs to be more disciplined in its economic expansion. We cannot continue to solve every problem with new bonds, low reserve requirements, and more debt -- our currency will become worthless in the global marketplace.
The worst aspect of all of this is....
... the continuing loss of faith in the broader American public for the basic tenets of capitalism.
Over the last 20 years or so, as more and more Americans have seen the largest corporations behaving in truly shameless fashion via: insane CEO compensation packages (think Carly Fiorina who destroyed half of HP's value while sacking 20,000 employees before being fired herself - with a $40M severance package paid for by the shareholders whose value she destroyed.); idiotic deal-making (GM and Delphi; GM and Fiat;....) that loses billions of dollars each; massive layoffs with no concern at all for those displaced (I used to attend Al-anon meetings where virtually every guy in there had been laid off by their companies after 20-30 years of loyal service - the anger and loss of faith was palpable.); and all the while the "leaders" of these companies waltz around in private jets and lecture people on how they just need to adapt, while they lead their companies off a cliff.
Don't mis-understand - I am a proud capitalist pig but - as was pointed out earlier - when companies become "too big to fail" or, even, become a crucial part of the national well-being (think the oil companies) then they should be subject to a greater degree of regulation and control than the normal laissez-faire approach relevant to "regular" companies.
We're all seeing what happens with gas prices when the religion of "deregulation" allows speculators to drive the price of oil to unreasonable levels, almost destroying the airline and trucking industries. At some point, the madness must stop.
The right approach, in my opinion, then is to allow the small and medium-sized businesses that are at the heart of American capitalism to be allowed to grow unfettered by having to pay for the sins of those who are destroying the financial foundations of our economy. Even more then the saps who took out those sup-prime loans, those who should have known better must be made to pay the price of their sins.
Re: America vs. Small Business (1-0)
Chris-It's a simple axiom in business that you already know, but choose to whine about...those who carry the most weight usually get what they want from Washington...when Fonality becomes the size of GM, then you can call "W" and order your own bailout...the small businessman is like a Haitian in a hurricane...fighting day to day to stay alive...and if you're one of the lucky few, who due to an exhorbinant amount of hard work, plus a little luck and good timing, make it to the big leagues..then you get the brass ring....and have earned the right to be the big swinging anaconda in the room....the Wall Street Behemoth's demise can have rippling effects throughout the world's economy...if a small businessman can't get a loan from a local bank, VC, or entrepenuer..then where's the new innovation funded from? China pumps a billion a day into this economy...and they want to know that their money is safe...like it or not, the US is a debtor nation now..other than the auto industry, we no longer make anything tangible on a grand scale...we're a nation of services, skimming a percentage from every transaction we can find....so my friend, it's time to get back in the fighter and load up a few Side-Winders for your competition...once you bested them and become the IP-PBX industry leader, you can enjoy the fruits and "benny's" of being the big anaconda on the block. Sincerely, your new channel marketing manager...that it once you hire me...Marc
It doesn't hurt Wall Street
It doesn't hurt Wall Street to have a representative in the government (Paulson) who is pushing for the $700,000,000,000.00 because of his past association with Goldman Sachs and his relationships, which have remained, with the powers to be of the banking industry. They keep saying "Main Street America" will be hurt by the down housing market. However, wouldn't this be the perfect opportunity for the housing market to adjust itself to the reality of the market. I.E. the California housing market could surely use an adjustment due to the ludicrous pricing structure that now exists.
Of National Interest...
quote - 'BTW, is there a secret room somewhere where a council of wizened druids decide exactly what our nation finds “interesting?”'
Well, it's not a little room exactly, and it changes depending on where they choose to meet. Given it's a secret organization, they don't likely reveal their whereabouts.
ERP
Chris:
To answer your question directly,” what can the Gov due for us?”
As C-Levels who are willing to bleed for our Co’s the Government should give us a break on the early withdrawal penalty for cashing in our personal IRA’s and 401k’s to prop up our ventures cash flow while we innovate down our overhead while trying to save jobs in an attempt to reverse or mitigate this downward economic spiral of job loss.
The Treasury Dept via the IRS recently lifted a long time 35% fee/fine for any large US Co who barrowed cash from an offshore subsidiary. Xerox promptly barrowed $300MM form its Canadian subsidiary saving $90MM +/-. Thanking the Gov for their wisdom and giving Xerox breathing room to reorganize and innovate down their overhead, they did so by promptly slashing 3000 jobs, Gee that sure helps the economy, NOT!
Scott
We're all seeing what
We're all seeing what happens with gas prices when the religion of "deregulation" allows speculators to drive the price of oil to unreasonable levels, almost destroying the airline and trucking industries. At some point, the madness must stop.
anit-trust laws
Quoted from Wikapedia: "United States antitrust law is the body of laws that prohibits anti-competitive behavior (monopoly) and unfair business practices. Antitrust laws are designed to encourage competition in the marketplace. [1] These competition laws make illegal certain practices deemed to hurt businesses or consumers or both, or generally to violate standards of ethical behavior"
Do we have grounds here to sue the US government for breaking Anti-Trust regulation. Surely these bailouts give these big companies Huge advantages over their smaller competitors. If these companies get so big that they need gov't money to bail them out when they get in trouble, surley they are too big and should have been broken up into smaller companies acording to anti-trust regulation.
If Microsoft went bust, they would need bailing out because so much of the economy relies upon their products to perform their daily functions. I fully support successful businesses, but when they get so large that they begin to jeopardise the economy then I say, its time for the axe.
Small Business owners are
Small Business owners are largely forgotten. Thats why I only focus on them. I have experience several members of my family file bankruptcy due to small business failures. I also I suffered through 2 destroyed businesses due to failure however, in my failings I have learned some of the secrets to success. (Who can say they know it all?)
What I like about small business owners is that they are not afraid to take huge risks and lay it all on the line. But, I agree they do need a lot of help with their marketing. I think having them go the social media and email route is not only the least expensive but its also the most effective. Thanks for the stats!
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