Thursday, July 08, 2010

Steven Pearlstein's Free Business Consultancy

I read Steven Pearlstein regularly, and really enjoy it at the price of $0.
Would I pay more? Well, what do you think the following advice is worth?
...However, I am a small business owner. While things have picked up slightly, I am sure not hiring anyone. Why? I am uncertain what health-care reform will cost me and what new/ increased taxes are on the way. If there was a more positive, pro-small business environment out there (meaning, in Washington), I would hire more people. I currently employ 12 and could go to 15 or 16, but I won't with the uncertainty. Also, every (and I mean EVERY) small business owner I know is feeling the same and making similar decisions.

Steven Pearlstein writes:

Health care reform cuts lots of different ways for small businesses....Until that sorts itself out, you and other small business owners may face uncertainty -- there is no doubt about that. But you have to understand that there really isn't any good time to do such a reform...It's a one time change, it involves some disruption and uncertainty, but before long the costs and benefits will be known, people and businesses will adjust and the economy will move on.

That said, I remain somewhat skeptical of the notion that you have some great business oppportunity out there that would justify your expanding your staff by 25 percent but you are not going to do it because you might have to pay several thousand dollars more for health insurance in the future. First of all, you can fire people as easily as you can hire them -- that's one of the great "advantages" of the U.S economy. And if the profit margins on the incremental business are so thin that even a few thousand dollars is the difference between making money and losing it, then maybe there is more at issue here than public policy.

Now I don't own a business myself, but it doesn't take a lot of thinking to react really negatively to someone's suggestion that "I think you need to cowboy up and take a risk with your business in the hope that things won't go south". The failure rates for small businesses, even in good times, are somewhat daunting. The focus on health care as the source of uncertainty is also something I find miscast... it's the combination of health care, expected tax increases, and the fact that "every other small business owner I know is feeling the same..." that makes one pause. Steve calls this "group think". I'd call it "canvassing your compatriots, business partners, and customers", and I'm really sorry that everyone's caution interferes with Steve's idea of how to jump start the recovery.
I also deeply appreciate how easy it is for Steve to fire people. I don't know how often he does it, but I generally associate myself with people who I like, trust, and want to keep around, and consider it fairly gut-wrenching to have to let someone go when their performance and attitude are good.

The attempt to browbeat businesses (large and small alike) into "doing more" is a pretty laughable strategy, in my mind. Bottom line is that many/most CEOs can justify their inaction because of the uncertainty, and any attempt by shareholders and Boards to force some sort of forward progress can be answered by a savvy CEO using Mr. Obama's own metric of "company valuation created or saved". "Yes, the stock isn't moving higher, but no, the bottom hasn't dropped out either."
If the Dem's fall strategy is to claim that "we didn't get the stimulus right because the economy was much worse than we thought" and "it's not getting better because everyone's obstructing us", I think they'll get the spanking they deserve.

Mr. Obama's choice between "being a mediocre two-term president or a great one-term president" is missing what looks to be his other other option -- a mediocre one-term president. (Lest you think I'm cheering for this, I'm looking at the loss of a million man-hours of work that you can never get back, and another four years to make it harder to solve the core problem of "everyone's getting to retirement and no one's working to pay for it".)

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