How Booms Bust Small Businesses

I was speaking with a venerable retailer Friday night about his business. He got started in the early 50's with a partner on Capitol Hill in Seattle, and then after about 25 years he relocated solo in Seattle's Belltown area. Although I've done business with him in the past, he would not remember me personally, but we have many common associates. I did not reveal any of this as we began talking. He had a "for lease" sign in his window so I started the conversation with "End of an era?"

He laughed and said he wanted to shut it down last year, but now he is just consolidating and perhaps will rent out some rooms of his store. Yes business is way down, but he likes it enough to keep going. (He hardly has to continue for the money, he has homes here and overseas and has made quite a bit of money as a small upscale retailer).

I threw out the question "what advice would you have for someone starting out?" He paused, dropped everything, and said "there is a problem. This kind of store (gift, housewares and the occasional furniture piece) makes its money on the furniture. In the last ten or so years, all of the best furniture makers around the world, in particular Italy and Denmark, had all of their production booked by developers. Since supply was short we small retailers began to starve. Many went out of business." He laughed and said "(name of famous Italian furniture maker) and I were just talking about this last week,,, he said selling to the developers killed his business."

This is a version of the story in my book regarding Levitz and Kroehler Furniture. In this case it is building developers buying up all of the production for upscale furniture for the executive offices in those building during the dot.com boom of Clinton era and the housing boom of bush era. One reason USA management is so more expensive than management overseas is it has become a perk to remaodel your office if you change jobs or move locations. Here is one John Thain's budget for his remodel. Of course his is top flight, and we know about his costs because he is taking handouts from the taxpayers.

But keep in mind, this is just one executive, and one location change, of millions of such in business and government (yes, govt workers do this too.) The developers who build these buildings earn tremendous income from decorating the interiors as well. One london developer says they "have a healthy interior-design business" in relation to their dwindling fortunes.

So as a direct result of the greed of the legion of government workers who fashion policies that serve their minions in big business, honest productive citizens have not seen that nice chair, couch or table in the upscale local store for the last decade and more. The production of such items was vacuumed up to decorate the high rises of building housing businesses devoted to making money off of government policies, and some of us saw then, and everyone sees now, has been a complete waste, and worse.

Job number one is for honest business people to refuse to trade with the government and big business, any more than we would trade with the Aparteid South African Government, for the same reasons. In this way one segment would not starve the other small business segment. It is also in self-defense, because now with the bust and no new developments, some of these first class furniture makers are ending up as greeters at WalmMrt since there are not enough upscale small businesses to sell to any more, to support their work. They starved their customers to feed a beast.

I probed this question of starting a new retail upscale business like his, and compared his situation in the 1950's with now: no money, have to learn for yourself, cheap rent, and what suppliers there are hungry for new customers. Just the same today as back then, he laughed and agreed. It will be tougher now that Obama has decided to follow precisely the Bush polices in every way in his administration than it would have been if he were to make some changes, but it is not impossible. On the other hand, anyone who wishes to ride out these self-inflicted hard times has no better option than to become self-employed.

We talked about how some suppliers moved production to china. At first lousy quality, but now it is as good as anywhere. The best and brightest from all of the top universities in USA the last 50 years went into industry and government and crafted a plan that would put USA in charge of the world and themselves in charge of USA. Now we cannot get a decent chair from Italy. Why do people want their kids to go to top universities?

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