Saturday, February 12, 2011

Discussion Points

Donald Trump tells us that the "real unemployment" is 18%, a statement which I am inclined to believe. Whole industries in mass have moved their manufacturing to China, raising the question as to the benefits of free trade. CEO's in every sector continue to earn huge salaries and bonuses while multinational corporations earn large profits and, instead of hiring, increase their cash positions and invest abroad. In the state of the union address President Obama pledges the creation of new quality jobs. I wonder how can this happen unless there is a shift in the attitude of all those involved towards the need to support small business.
We are told that if we do not learn from history we are doomed to repeat the same mistakes of the past. When I was in my thirties I made several investment presentations to Highland Capital and to the MIT Sloan School of Management. I detailed a bright picture of franchising in the office products industry, using the examples of True Value and Ace Hardware in the Hardware industry and compared them to the box stores of Home Depot and Lowes. While the investors seemed to like my business plan, I am now sure that the investment and business school communities ignored the modest profit picture I had projected in favor of much richer profits of business concepts such as the Staples box-store model. Staples management team all came from the Harvard Business School. As the result, the office products industry today consists of only three large superstores that control 98% of the industry. The Staples founder has become a billionaire and the stockholders have made a great deal of money, but they put over 12,000 smaller independent store owners out of business. The box stores offer low paying store manager jobs with even lower paid store clerks. Worst of all they hastened the elimination of American- made office products in favor of much lower cost products that come from China and other Pacific Rim countries. Those manufacturers who did not move to China they are out of business. This industry example is just one of a tidal wave of businesses that were moved off shore...all for the benefit of "Free Trade". The franchising business model in the US would have promoted support, purchasing power, advertising, and entrepreneurship by focused, energetic new business owners. Would they have been more community sensitive to their fellow business leaders and become sponsors of youth and non-profit organizations? Instead of creating new levels of wealthy jet set billionaires would these franchise owners better share their wealth within the country? Now, in light of concern we share with a planet that is experiencing global warming we are starting to measure companies with the impact they have in leaving a "carbon footprint". Should we also have been doing the same with how companies deal with people that serve their success. It is obvious that the excesses of capitalism often create human suffering. We've seen this in history resulting in revolution thus creating the need for trade unions. Capitalism, in most cases, shares the podium with democracy unless you are in China. However, people in democratic countries have little to say when their business leaders and universities discover new methods by which to exploit their people. If the rule of capitalism is total greed then should we then find a balance to control the irresponsibility associated with this extreme? Public resources should not be made available to those institutions that hasten these reckless abuses of the system causing us 18% unemployment? Do leaders within the business schools really care about the country's larger picture? While there is a global need for upward mobility as in the United States, can there be a responsible transition that addresses the "Human Footprint"? Will universities and business schools become advocates for more responsible business development?