Anonymous Hearts WalMart and Debt

Here is a comment on an earlier post:

"Clearly many good businesses were built on debt, Walmart for one. Have more businesses failed because of debt than succeeded in spite of? Who knows? With businesses that require much startup capital, and where the genesis of the business is with the specialist and not the businessman it will rarely happen that the specialist could save for 10 years to finance the biz. Knowing this, angel investors and vcs trawl computer science labs at college, two give one example. Sure, many startup that took money would've been better off to self finance, but it doesn't prove anything about the wisdom of accepting investment."


Not all financing is debt.  You've shifted from building a business on debt to building a business with investors money.

WalMart is like every other large biz, a mix of good and bad: leveraging vendor financing into mass merchandising and lowering prices to widen access to goods and services.  Good.  Exploiting eminent domain to take private property and transfer it to themselves.  Bad.  No doubt if Walmart was forbidden some of the unethical practices, it would still be biggest, but not as big.


Gates had his own capital, so he and Allen could start Microsoft on savings.  Jobs and Wozniak had nothing, so they started Apple with savings.  They did build Apple with other peoples savings, so it is possible to grow biz without debt.  The venture capitalists offer savings to the specialist.


Now Enron, Countrywide, WAMU and many other businesses were built on debt.  Clarify which good ones were.

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References and Samples

On Jun 30, 2011, at 8:40 PM, S  wrote:

I have some additional questions regarding suppliers and samples. Any advice would be greatly appreciated.

I'm in touch with a number of suppliers that I found on HKTDC. I'm seeing that some of them have never sold to the US (instead, they've sold to Europe, South America, Middle East, Asia). Right now that doesn't seem to be a problem for me as I will rank them based on their level of professionalism as well as the quality of their samples. Should I be concerned that they've never sold to the US? Even though it's just a logistical issue, does it really matter?

***Does not matter, the quality of their references, does matter though...***

In my initial letter I mentioned that I would like to meet with them if they were ever in town. All replied that they regretfully had no plans on visiting the Bay Area but would be glad to meet if I was ever in China. Now, I had no plans on visiting China. My question is...should I start making plans? You've mentioned that in this business, relationships are everything. Am I delusional to think that I can do this without making a trip overseas? Is it common to do this with just email and phone?

***In my book I mention a fellow who had a successful 30 year career without ever visiting the factory... not delusional, but a fun part of the lifestyle...***

Regarding samples from various suppliers...you've suggested that its not important what we think, rather what the customer thinks of the product. Is it uncommon to introduce samples from different suppliers, for the same type of product, and then see which one gets enough orders to cover the suppliers minimum? Its just a thought that came to mind.

***Not at all, Zac Posen has a 50% failure rate of his samples (no interest), they come from various suppliers, and last week in a class an employee of a fashion house (Max Mara) chuckled regretfully and said "...sounds about right..."***

My last question is a little off topic...regarding patents. I was just curious...if I were to sell a product and then someone came in and patented it, can I get sued even though there's proof that I sold the product before it was patented?

***I believe you are right on this... but by the time your product gets enough notice you've made your money on that design, and are moving on to new designs, based on customer feedback, anyway...  Drucker says all products are solutions to problems, and there is no solution that cannot be improved upon... the rip-off artists take far longer than people think (several years), and you make changes far faster that you anticipate (couple years).  Your safety is in the market, your marketing.***

John

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A Rollicking Good Read

Here a fellow notices an ancient Latin maxim regarding the Tarpeian rock, whence disgraced politicians were thrown, was close to Rome, meaning the line between praise and disgrace is thin indeed.  And what is the beginning of the end for USA?  TARP, brought by the Republicans, and advanced by the democrats.

Here are some quotes within the article...

"Keynes came up with a subterfuge. The central bank should cause price inflation during a slump, he proposed. Rising prices for 'things' meant that salaries - in real terms - would go down. That was the greasy scam behind Keynes' General Theory of Employment, Interest and Money: inflation robbed the working class of their wages without them realizing it. The poor schmucks even thank the politicians for picking their pockets: "salary cuts without tears," Rueff called them."

What we are seeing right now is a Fed creating price inflation during the current slump ensuring the "poor schmucks" real terms wages are going down.

This is what happened during the big Stagflation period of the 70s:

"Between 1974 and 1984, real wages fell as much as 30%."

In Homage to Jacques Rueff, Bill Bonner added the following:

"But Rueff’s insight comes with a warning. The faith-based, dollar-dependent monetary system is like a loaded pistol in front of a depressed man. It is too easy for the US to end its financial troubles, Rueff pointed out, just by printing more dollars. Eventually, this “exorbitant privilege” will be “suicidal” for Western economies, he predicted."

Bill Bonner concluded:

"Paul Volcker put the pistol in the drawer. Ben Bernanke has found it. And Jacques Rueff must look on in amusement to see what happens next."

Sean Corrigan also adds in his article:

"Emphatically, the only 'risks associated with deflation' are those which come from clinging too long in the naive faith that the value of one's money will be preserved by a central bank which can still talk about such an eventuality while the malign effects of its inflationary policies are everywhere increasingly undeniable."

"In a West already displaying symptoms of the extirpation of the middle class, in favour of the governing military-political elite and at the cost of buying off its feckless urban proletariat with a higher dole and more spectacular circuses, the more the state expands in this way, the more success it will enjoy in the only one of its wars on abstract nouns which it wages unremittingly and a outrance - its War on Capital."

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MisAllocated Resources

These lads decided a pilot needed beating, so they gave him one, even chasing him around the terminal until passengers (not law enforcement) subdued the thugs.  They missed their flight.

Because we allow the government to be in charge of airplane security, these things happen.  What do they care?  If the airlines were in charge of airplane security, these would not happen, because the airlines would share information and refuse service to trouble makers.  It was not the first time to the rodeo for these two lads...

But wait, wait...  since airlines are heavily subsidized, based on being a "public good," rules prohibiting such discrimination prevent airlines from sharing experiences and creating their own no-fly lists.

Get rid of the TSA, and give security back to the airlines, and let them compete as to who is the most secure airline to fly.  Then let the market decide.

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Southern Fried Corn Pone

Here is a service, comedy, American style, USA south division... funny stuff, and nary a foul word...  so it can be done...  check out her various bits... there is a header for a second, but she comes on...

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Savings and Wealth

Savings occur as people find they have more from their market exchanges that when they started.  If the money is gold, the savings will be gold. Savings can be wheat or rice stored up, but as a medium of exchange, money is the most likely form of savings and the most facile to apply to an entrepreneurial opportunity.  


A very common error is to start a business with debt, especially with some sort of "interest" attached.  In essence you begin your enterprise working for someone else besides your customers.  Wealth is built on savings, not debt.


Savings are drawn on to finance entrepreneurship, which inherently expands choices, that is to say the division of labor producing goods and services. The entrepreneur advances the eternal free market function of innovation in goods and services, innovation that results in the unique, rough, pricey and plodding, coming and going; market iteration ever improves items until the conservators "steal the idea," and apply their economies of scale to the innovation, resulting in more, better cheaper faster of the innovative good or service.  Ultimately, through the market and the concomitant division of labor, access to goods and services is made universal.  The market, when relatively free, lowers the price of computing and widens the access to the point where  the market puts more power than was available to NASA to put a man on the moon in your hands today, the iPad, $500.  If we had as free a market in medicine, then cancer cure, at $87.50.  


There is the original sense of "wealth," ie, weal, commonweal, commonwealth, before the bad guys hijacked the term.  Wealth is not how much gold you have stacked up, wealth is access to goods and services.  Progress is when prices fall, to the point where everyone has access to the good or service, like the cell phone and service plan that goes with it.


This is not a world in which we "live simply, in order that others may simply live" but a world in which we live fully, because everyone is free to contribute.


What inhibits this market is the monopoly on violence behind the cartels, rules, regulations, subsidies and unnatural initiatives and the attendant misallocation or resources and malinvestment.


The way out of our economic mess is freedom.  But we first need to understand where we want to go.

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Entrepreneurs Do Not Take Risks

When I first read this in Peter Druckers' Innovation and Entrepreneurship, I was astonished.  How could he say such a thing?  I read on. He explained why.  I thought back to every successful entrepreneur I had ever met.  None had ever taken any risks.  Drucker was right.  How did I come to believe "entrepreneurs take risks?"  Like everyone else, the nonsense is repeated over and over, until we all "know" it is "true."  Such is pavlovian conditioning.

Of course there is risk in life, such as I may crash skiing or die in a plane crash. C'est la morte, when your number is up, it's up.

But entrepreneurs are motivated out of suffering (passion) and the joy they find in working on ameliorating the problem they experience.  And from this work, the lifestyle follows, and the money follows...  here is a discussion, mid-stream, on this point:

You philosophy got straight to "do," as opposed to "have."  You want nice house in a nice neighborhood, so you can walk down the street unmolested.  You want the choice to eat a better meal.  You want to do altruism.

Money does not equal freedom, it remains what it is, and that is a medium of exchange and a store of value.  You can exchange it for goods and services at the going rate.  Freedom remains where it is lodged, and that is in choice, where we decide what to do.

Two errors: time, and "money is the lifeblood of the economy."  You leave out that with time, one can do all of the things that money buys.  Money may speed things up, but not always.  And when time runs out, your choices are over, even when you are still alive.  It takes time to earn the money, and time to spend it.  Self employed, you control when and how you engage in the act of spending money, and where and on what.  That takes time, doing what you are doing.  Before and after taxes.  I defined success (in another one of these inquiries) as when you worry more about time than money.  When time is in the equation, money is managed as just another means to an end.

Human action, not money,  is the lifeblood of the economy. Most, almost all, of the economy is non-monetary.  The grandma who takes care of the kids.  The volunteer fireman (70% of the firefighters in USA, unpaid).  A friend who put together a meal, throws a party.  At any given night, most people are sitting down to a meal made at home, not sitting in restaurants.  An clear example is the Amish community,  thriving community wherein all is relationships, barter and community effort, and very little money.  They are so interdependent that the are legally exempt from paying money into social security.  Because of what they do, they need not pay.  Now in our wider economy, we have vast swathes of people who build houses based on credit (not money) for people who produce other goods and services, and so on, tallied by promises to pay, at some point.  The Amish system down in writing, on a gargantuan scale. It ain't money, it is a mind-boggling aggregation of promises to pay money, but it is not money.  Problem is this is so hard to track, and so easy to scam, that it is very unstable.  Many rich fail, although some get richer.  The self-employed, like the Amish, plod along, happy with what we have, because the focus is in "do."

Most neighborhoods are safe, but fear grips both extremes, the poor with the drug deals outside, the wealthy in their gated communities.

I've been to plenty of $250 a plate dinners, for business.  It makes sense there.  A few with family, which make little sense.  Why put up with the pomp and circumstance of such fine meals, when the real meal I look forward to each year is the family reunion feast at a shack on the beach where we eat the free crab, clams, oysters, shrimp and mussels and home brew.  For all meals, it is the company that matters, and what the say and do that make it memorable and enjoyable.  Setting can be lovely, and camping can be a lovely setting.

Everyday, any given day, we are dealt a hand.  The hand we are dealt never matters, it is how we play the cards, what we do that matters.  A lot of money does not change that day.  And I think that is the delusional thing, believing it will.

It is people's actions that divide and separate, not money.   I think maybe you are assigning an emotional value to money: how much can I get, what can I do with it? Some psychological calculation: the more I have the better I'll feel.  You would not be unique in this, almost everyone does.  I happen to think that is a conditioned response, and I think it keeps people from being as creative as they might, I think it denies the rest of us the good of others creativity.

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