Author: LLPOH

This is an adjunct to Grim Reality #1. The following article, from The Washington Post, details how the US has lost some 687,000 high tech jobs in the last ten years – a decline of 28%. These jobs have gone to – you guessed it – China.

 http://www.washingtonpost.com/business/economy/us-losing-high-tech-manufacturing-jobs-to-asia/2012/01/17/gIQA9P1S6P_story.html?hpid=z4

Some salient points, in addition to the job losses, include:

– Research and development expenditures in China now matches that of the US. Of course, given their cost advantage, that implies that they are spending vastly more man-hours on R+D than is the US. Additionally, nine other nations world-wide now spend as much as the US on R+D.

– Doctoral degrees in engineering in China have doubled in the ten years and their output in this area now far exceeds that of the US. No surprise there.

– US multinationals are hiring great numbers of overseas research workers

– “Although the long decline of manufacturing employment in the United States is often attributed to the cheaper wages in developing countries, China and developing countries in Asia have in recent years sought to lure more sophisticated manufacturing operations — and better jobs — by expanding their engineering prowess through government investment in education and research.” Government investment in education and research – now there is a thought. Bet they aren’t investing in art history.

– It also says that China’s cost advantage is shrinking. However, it attributes a lot of that to America’s automation of its factories, which reduces labor cost per unit. So there is not a lot of joy there.

So, in sum, the US is under attack not only in manufacturing but in high tech as well. And service jobs (IT/accounting/etc.) are also under attack, but that is a story for another day. Oh happy days are here again.

I came across the following article in the New York Times:

 http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html?_r=1&pagewanted=all

This article is reasonably long, but I highly recommend it, as it gives great insight as to why manufacturing is doomed in the western world, particularly in the US. The destruction cannot be avoided. Action was needed decades ago, but was not taken.

This article highlights the problems manufacturers face in the US, and clearly demonstrates why large-scale manufacturing is not coming back to the US. It is a fairly long article, and focuses mainly on Apple and its manufacturing, but the issues are the same for all manufacturing. China has a number of significant advantages that cannot be overcome, including: 1) huge economies of scale, a skilled, 2) a compliant and cheap workforce, 3) a government that invests in, and supports manufacturing, 4) major advantages in the supply chain (ie. all suppliers of sub-components of a product are located close together), and 5) enormous flexibility and responsiveness to customer requirements. Following are the salient points, and some comments of my own. The US in particular lacks all of these things. Following are salient points from the article, with my comments added.

– Obama (Einstein that he is) asked Steve Jobs why the manufacturing jobs cannot return to the US. Jobs replied that manufacturing jobs are not coming back.

– Made in the USA is simply not viable. (I have been making this point ad nauseum).

– Apple employees 63,000 people directly world-wide, about 2/3 of those in the US. An additional 700,000 are employed on their behalf, almost entirely overseas, designing and building Apple products. (700,000 employees transferred to the US would fix the US unemployment problem, when the trickle-down effect is considered. Of course, if Apple relocated the 700,000 from overseas to the US, they would go broke. Small problem there.)

– One of the primary sub-contracting agencies, Foxconn, employees 230,000 manufacturing workers in one facility. That bears repeating: One of the primary sub-contracting agencies, Foxconn, employees 230,000 manufacturing workers in one facility. They have dozens of facilities. The employees live in dorms at the facility. (Try that in the US!)

– The average wage in the above facility is $17 per day – for 12 hour shifts. (My average wage and benefits bill for a 12 hr. shift would be over $400 – or over 20 times more. I simply cannot compete.)

– The entire supply chain is geographically close together – i.e. parts suppliers are right next door to each other. (My suppliers are spread out across the country and across the world. As a result, transport costs for my sub-components are quite high, and delivery/lead-times times are long.)

– The US is not and has not produced enough mid-skill workers. (That is one of my theme songs.)

– China has the ability to increase and decrease production in a very short period of time – almost instantly. (I need weeks and/or months to do the same thing. For me to hire and train workers, get my supply chain in order, etc. for an increase is an extended process. To decrease production also takes weeks – I have outstanding purchase orders in place that I have to honor, I have work-in-process that needs to be completed, etc. I cannot compete on speed.)

– They give an example of a special made screw being made/delivered in 3 hours. (For me it would take days or weeks to get a special made screw, or anything else for that matter.)

– Governments assist their manufacturing industry. (Mine – not so much. Quite the opposite.)

– They are able to hire 3000 employees overnight if required. Let me repeat that – they can hire 3000 fully trained people overnight! (For me to hire/train 30 would take at least 5 or 6 months. I cannot compete.)

– They hired 8,700 industrial engineers in 15 days. Again, I repeat – they hired 8,700 industrial engineers in 15 days. In the US they predicted it would take 9 months to do the same thing. (No comment needed.)

– “The US has stopped producing people with skills we need” – unnamed Apple exec. (Wow – now there is a detail I had missed. Not. He is absolutely correct.)

– It predicts that middle class-jobs may return, eventually. But not for the current workers – for “future” workers. But it doesn’t predict when or in what fields. But it does say that those people already out in the workforce are screwed. (It doesn’t use the word screwed – that is my translation. But of course they are correct. Unskilled workers are available – but there is no market for them, as they are far too expensive and spoiled to compete in a global marketplace. Unskilled people or people with non-marketable skills are in for a very bad time. Skilled manufacturing people in particular are in for a bad time – as there are too few of them, and there are too many obstacles to overcome – wages (20 times higher), a dislocated supply chain, the inability to be able to react quickly, etc.).

So, in sum, the picture is not pretty. In fact, it is disastrous. Globalism is here to stay – it is not going away. The pain and suffering for the middle class will increase, and accelerate, in my opinion. We have fallen too far behind to recover position, even if the scale issues and cultural issues were not so severe. There may be some opportunities in niche markets, but they will not be plentiful.

It will be ever more difficult to start up and run a business, in any event, as US government policy continues to add to the burden of small businesspeople. Large companies will continue to send work overseas – the US cannot compete against the rest of the world, and the fact is that they have no choice, as they will fall prey to their competitors if they do not – not only to minimize cost, but to improve responsiveness to their customers, as it is suicide to be slow to meet customer’s demands. Anyone who believes that the situation can be reversed is deluding themselves. Manufacturing, and indeed services, will continue to leave the US as the Chinese are simply more cost efficient, educated, flexible, and responsive to their customers. It is game over, man. Game over. The Chinese have won and are now just running out the clock.

During my life, I have gradually developed a set of things that I believe. As a young person, I received very little in the way of help in developing these beliefs. In general, as a young person I never considered these things to be important. But somewhere along the line, I determined that what I wanted to be was an educated man, and that I wanted to make things, and be successful in business, and to have a happy, healthy, emotionally sound family. As a result, I gradually began to develop things I believe in. Following is a very truncated list of things I believe in. I add and subtract from things I believe in all of the time, and alter it based on things I learn and experience. The reason I have put this list forward is that these beliefs form the basis for my position on most issues. At the moment I am struggling to understand why some people take the positions that they do, as it seems to indicate that their belief set is extremely dissimilar to mine, and so I am confused. I welcome your comments and additions to this list.

I believe:

– in the general decency of the American people
– in the US form of government
– in the resilience of the American people
– in the obligation to conduct business honestly and with integrity
– that if one of my employees has the courage to ask me the question I need to have the courage to respond honestly
– in education
– in education for its own sake
– that the country needs to improve its education in the sciences, math, and engineering
– that governments should not fund college educations in the arts, but should funnel the money into science, math, and engineering
– that the general decency of the American people is being eroded by a growing welfare state
– that each person must be responsible for their own actions
– that each person should be responsible for meeting the costs of their retirement and old age
– in family
– in telling my children and my wife that I love them every day
– in becoming a better person each day
– in acting within the law
– in personal financial responsibility
– in spending less than you earn
– in paying your debts
– in staying debt free, except for financing an education and buying a home
– that building things is a noble pursuit
– in writing my representatives demanding change
– in books
– in reading every day
– in learning something every day
– in peaceful, lawful protest
– in protecting the weak
– in respecting the aged
– in loyalty to one’s family and friends
– in charity
– in being kind to animals
– in leaving a positive future for my children
– that making a profit is a good thing
– in capitalism
– in being polite to those providing me service
– that being rich is not a sin
– that being poor is not a sin
– in buying American-made
– that unions suck
– that everyone should have to pay taxes
– that we pay too much tax
– that the government spends too much
– that we should not be policing the world
– that we should secure our borders
– a man’s word is his bond
– in hard-work
– in no excuses
– in good planning
– in living life so that when I look back I will have no regrets

And this list goes on and on. Thanks for reading.

Recently, I have been giving a lot of thought to the issue of wealth distribution, and consideration to whether or not the situation can be markedly improved. After much thought, I am reasonably convinced that there is little to be done to reverse the current distribution patterns, where the top 20% control around 88% of the nation’s wealth. Particularly, I am unable to see a way in which the wealth can be redistributed to the bottom half of population.

The factors that have contributed to my position include the following:

– The American middle class was largely built upon manufacturing. Manufacturing provided relatively well-paid jobs to a large number of unskilled and semi-skilled Americans. A large percentage of Americans had previously relied on low paid agricultural work. When the shift was made from an agrarian society to a manufacturing society, the middle class took off.

– Manufacturing employment has dwindled away markedly – jobs have been lost to low cost countries and as a result of technological development, and as a result of poor government decision-making and excess regulation.

– I do not see these jobs returning in bulk. There are some things that may happen around the fringe, but on the whole the ability of Americans to rely heavily on manufacturing to provide middle-class jobs has disappeared.

– I do not see any business sectors currently able to fill the void of middle-income jobs. There are some opportunities in the energy sector, in provision of educational services to the world, etc., but on the whole I do not believe that enough jobs will be created to offset the number of manufacturing jobs lost.

– Low-paid service sector jobs have replaced many of the more well-paid manufacturing jobs.

– Modern economies are tech driven and require considerable technical expertise

– The bottom half of economic society would have these basic characteristics (in general, where education levels attained correlate to intelligence and education attained correlates to income):
o A median IQ of around 89, and a top of 100
o Less than high school education

– My experience is that persons with IQs/education in this range are capable of menial or repetitive tasks, but cannot undertake tech jobs, operate high-tech equipment capably, be responsible for managing the quality of their own work, etc. As an example, these individuals are often unable to make change for a dollar without the use of a calculator or computer.

– The quality of the education that Americans receive is generally poor, and those in the bottom half are receiving an exceptionally poor education indeed.

So, looking at these factors, I simply cannot see large numbers of jobs to be created that will provide these people with work that will pay well enough to provide what we have come to understand as a middle class livelihood. The work available to them will largely be menial and very poorly paid. I simply see no other possibility. The result is that this group will be incapable of attaining a greater proportion of the nation’s wealth, and will be entirely dependent on capitalists to develop and provide employment.

So I then have considered the top half of the economic pool. At the upper end, the wealth is indeed highly concentrated. As an aside, I have no great problem with that. What I have a problem with is the extreme influence they have over the political system.

If these individuals were unable to influence the political process, then I believe a significant portion of their wealth might be redistributed. That is the good news. The bad news is that I believe that this wealth would make its way into the hands of the lesser wealthy – business owners, etc. I do not think that it would shift the balance of wealth outside of the hands of the top 10%. The top 1% would likely have somewhat less of the total wealth, but the top 10% would remain unchanged. That said, I think this is by far the best option, and needs to be implemented urgently.

Another option would be to “tax the rich” in one form or another. This might work. However, I expect that it would not redistribute wealth, but would rather tend to destroy it entirely. The rich would have less, and the receivers of the largesse would almost universally tend to spend the money and not create wealth, and in the end would be no better off. Additionally, there would be something of a disincentive created, which would result in reduced wealth creation over the long-term.

There may be other options re redistribution of wealth from the very wealthy, and I welcome thoughts on this. However, I do doubt that the redistribution would filter down to the bottom half of economic society.

With respect to those at the lower end of the top half, redistribution of wealth by elimination of the ability to wield political influence would greatly assist in economic mobility. People could start businesses, or grow existing business, without being hindered by influence peddlers. There would be some greater hope of attaining the American Dream.

In summation, I think that there are some issues which simply may be insurmountable. The combination of advanced technology and low-cost competition has created a situation where a significant proportion of the population will struggle mightily to earn a middle-class wage, given that they lack the skill and ability to thrive in such an economy. I truly hope that I am wrong in this, but I simply do not believe that the problem can be fixed.

Recently, I read an article written by Joe Biden (I cannot explain why I would ever have done that, except the title was something to the effect that “China is not a threat to US manufacturing”). Additionally, I regularly see TBP members calling out CEOs of corporations for destroying American jobs by sending product (and, more and more, services) overseas. Biden implies that we can overcome difficulties simply by working smarter and getting smarter. Additionally, some TBP members believe, apparently, that the CEOs are simply evil and are eliminating jobs out of spite. In combination, these two things have prompted the following article.

I believe that Biden, and many Americans, simply do not understand the cost differential (not to mention the regulatory differential and costs thereof) between running a manufacturing company in the US versus running a similar company in China. Following are the comparative costs of employing a manufacturing employee in the US versus employing one in China.

I do not wish to make this too technically complex. I have made a lot of assumptions herein, but in general terms the figures are accurate. Some of the assumptions relative to a manufacturing employee in the US are as follows:

– Average salary of $20 per hour
– Family health insurance of $12,000 per year
– Pension of 5% of total pay
– Worker’s compensation and payroll tax of 7.5% each
– Minor other miscellaneous costs of approx.
– Indirect labor costs (ie. managers/engineers/planners/QA/etc.) calculated at $75,000 per year plus above costs, and at a ratio of 4:1
– Vacation of 3 weeks/year, 10 national holidays, 8 days sick leave
–
When you blow through all the USA numbers, you get a cost per hour of employing a manufacturing worker of $47.91. But this number is at 100% efficiency – and allows for no coffee breaks, going to the toilet, chatting with co-workers, coming back late from lunch, etc. When these items are factored in, the cost per one hour of actual work is approx. $59.89 per hour. Major corporations have costs far exceeding these.

Is anyone out there surprised? And please remember these costs do not include profit, materials, indirect expenses like rent/property tax/electricity/ etc. Some indirect compliance costs are included (ie. the costs of EPA compliance, etc. are largely captured in overhead personnel.).

Following are the costs associated with employing a Chinese manufacturing worker. Assumptions are as follows:

– Monthly wage of $600 per month (this is highly variable subject to location, etc. but seems to be a reasonable number) inclusive of overtime
– On-costs (pension is the largest percentage at approx.. 20%), et al of 40%
– Cost of indirect workers at $15,000 per year plus 40% on costs
– 2 weeks of vacation and 10 annual holidays per year (widely variable but considered the norm)
– Direct to indirect of 4:1. This assumption is overstated, as there is far less regulation to attend to (EPA, etc.), and thus should really be reduced, but I have left it the same for comparison purposes.

When these assumptions are entered, the standard rate for a manufacturing employee in China is $6.54 per hour, and $7.70 when allowing for inefficiency estimates.
So we get a per hour DIFFERENTIAL between the cost of labor in the US versus China of $41.37 gross and $52.19 net. Stunning, isn’t it? Generally, when I am asked to quote on a part, I consider the likelihood of the part being eventually offshored to China. For simplicity, I simply assume the labor component of the Chinese made part to be zero, so insignificant is it to the process of making a comparison.

Further, there are huge differentials in cost of rents, cost of purchased materials (sourcing materials locally in China is obviously cheaper than sourcing materials locally in the US), etc. Plus there are often incentives granted by the Chinese government, and company tax is lower in China.

So let’s take a look at what this means to a manufacturer. Let us assume we have two manufacturing plants, one in the US and one in China, each having 100 direct manufacturing employees. The labor cost differential between the two is approx. $9.2 million per year. That is $9.2 MILLION PER YEAR! Plus all other cost differentials. I estimate the total cost differential would be approximately $15 to $20 million when all other cost differentials are included. Again, I ask, is anyone astonished?

Stuck, in a recent post, made comment about a $15 dollar Chinese made toaster. Let us look at that particular case. I am not a toaster manufacturer, but I can make some estimates that should be close.
First, the retailer probably has a $5 mark-up on this item (50%). That leaves $10. I have calculated shipping costs to be approximately $2 per toaster, leaving $8 dollars. Of this, let us say $1 is profit (10%), leaving $7. Assuming a material rate 70% for this item (the most expensive item will almost certainly be the carton!), that leaves a labor cost of $2. Going back to our cost per hour of $6.54, we can calculate the toaster is assembled/handled in 18 minutes. That seems reasonable, perhaps even overstated, to me, in my experience.

So what would the toaster cost to make in the US? Eighteen minutes of labor would cost $14.50. Materials would be more expensive, so let us say $7 in materials. Profit of 10% would be $2.15. Retail mark-up would be $11.80. Therefore, the retail price of the US made toaster would be in the order of $35.45. So a toaster can be made in China, shipped to the US, and sold for $15 dollars, where an identical US made toaster would sell for $35. Who on earth is going to buy that US toaster? Not your average Walmart shopper, that is for sure.

So this is what US manufacturers are up against. American CEOs are not sending jobs overseas just because they are evil – they are sending jobs overseas because they cannot sell their $35 dollar toasters when the same toaster is available for $15 dollars. They simply have no choice but to compete – otherwise their companies will go broke.

It is this reality that proves when Joe Biden says China is not a threat he has no idea what he is talking about. Not only does China have a massive cost advantage with respect to labor, China does not have the headache of the massive regulatory requirements of the US (EPA/OSHA/NLRB/state and local regs/et al).

There was a time when US manufacturers could make a case that they offered far superior quality of product. While China still has some issues in this regard, they have dramatically closed the gap, and manufacturers can no longer assume American made is more desirable from a quality perspective.

Similarly, the US was once much, much more efficient in its manufacture of goods than was China. It was not unusual to find that it took five Chinese laborers to do the job of one American laborer. Again, those days are gone (largely), and China has tooled up and equipped itself to compete much more effectively on this front. As an example, next year China is scheduled to complete a heavy truck manufacturing facility capable of producing 4 million trucks per year. Let me say that again for effect – 4 MILLION trucks per year! This facility will be highly efficient – you simply cannot make that volume of trucks inefficiently. What will that do, in the long-term – to truck manufacturing in the US/world-wide?

So where does that leave US manufacturing? I think that only companies with the following characteristics will have any chance of survival in the long run: First, the product will need to be difficult or expensive to transport relative to the cost of manufacture, or highly susceptible to transport damage. Second, the product will need to be specialized and largely unique/special made (think custom painted/special ordered/etc.). Third, the product will also need to have very tight delivery time requirements (ie. the product is special and it is required now, not in six weeks).

Even these specialized products will gradually be squeezed out, as China finishes off “low-hanging fruit” (low hanging fruit is the fruit that is easiest to pick). Right now, China is going for the volume items, but will eventually turn its sights to the lower volume, and more specialized, manufacturing fields. In the end, most true manufacturing will disappear from the US, and any that remain will more likely be assembling of foreign made components rather than true manufacturing as such. The perfect illustration of this is US automotive manufacture – the US really does not manufacture automobiles any more, but rather assembles parts, a great many of which are imported, into the finished vehicle.

So in summation, this article was intended 1) to clarify the huge cost differential between the US and China cost of labor, 2) to refute the general argument that US CEOs are choosing to manufacture in China, and show that they have no viable alternative, and 3) to paint a realistic picture of what is the likely future of US manufacturing. The regulatory red tape that is drowning small manufacturers is a further obstacle and makes the prospects of overcoming the cost pressure being applied by China (and its ilk) even more unlikely.

Clearly, I am very pessimistic about the future of manufacturing in the US. Surely, the cost differentials will close over time. But it will be far too late for the vast majority of US manufacturers, as they will have long disappeared before this happens. The next thing that will come under attack will be service industry that can be done electronically. Right now, call centers are the perfect example. But soon it will include accounting, etc. The cost of labor in the US is simply uncompetitive internationally. The US is moving far too slowly to improve its skill base sufficiently to justify the current differential. China and similar countries are educating and training their citizens by the millions, while the American standard of education continues to fall. The coming collapse will be monumental. It is unlikely that even the most skilled and innovative Americans will be able to ride out this storm unscathed.

When I was a young manager, and was interviewing people for a management position reporting to me, I discussed a good candidate with my mentor. I liked this one particular candidate, but he had been fired from his last job. I told my mentor that the guy being fired worried me. He thought a moment and replied “Never trust a man that has never been fired”. This bit of advice has stayed with me for almost three decades, and it was some of the best advice I ever received. (For all of you who have never been fired, please do not go into uproar, and note that the quote is “never trust”, not “cannot trust”.) I think about this advice often, and it has given me a lot of insight into people.

At the base level, what this means is that people deserve a second chance, and that failing once doesn’t mean that people will continuously fail. I am always willing to give people second chances, and often many more than that. I have come to realize that, for the most part, people that have issues almost never overcome them. Almost never. But nevertheless I give them opportunity to overcome their issues – drugs, alcohol, poor performance, bad interpersonal skills, whatever. I often do this in opposition to the advice of my managers and business partner. I personally assume the risk for these decisions. When these decisions go astray, I personally pay a financial and emotional penalty. However, what I have found is that on those rare occasions when people overcome their issues, and when they seize the opportunity given them, I benefit far more than any cost associated with the failures. The fact is I become a better person for having given someone the opportunity to overcome previous failures. It is a tremendous feeling.

At deeper levels, the above statement means that you do not know how someone will react to adversity if they have never had to overcome adversity. Someone who has never failed must not be trusted because it is impossible to tell how they will respond when crisis hits. It is critical to know this about a person if you are going to place trust in them. Some people curl up into a ball when they have failed, or seek refuge in the bottom of a bottle, while others pick themselves up and strive to overcome. I can only give my trust to those people I know will redouble their efforts in time of crisis.

Failure also teaches people about themselves – if they are willing to learn. It teaches them what they do well, and what they do not so well. If they are smart, they concentrate on the good and avoid the bad. It is really quite simple.

Failure can also be a result of factors beyond a person’s control. There is a lot of that going around – manufacturing plants closing, jobs being shed, and political infighting resulting in purges of personnel. A person that gets caught in such a position deserves special consideration, but that person also needs to show the willingness and fortitude to overcome adversity.

Perhaps the most despicable of all are those that fail, are those that do not care that they fail, and actually make a career out of ongoing failure. They have no integrity and no soul. Almost every politician you see is of this ilk. They fail – and they know they fail – at almost anything they do or have ever done. Yet they are so dishonest and lacking in integrity, they opt to retain the trappings of success and power. They do worse than nothing – they actually do ill. It is disgusting.

I have been fired twice in my life. I was a young engineer. I was a terrible engineer. I simply could not finish a project. I would complete it 90%, and then move on to the next project, as I simply did not have the personality to see it all of the way through. I became bored and was always looking for something else to do when I rather was meant to be completing the project in hand. The company rightfully terminated my services. But I learned something very valuable – I was not meant to be an engineer, and was not meant to undertake projects personally. I transitioned into manufacturing management. This I quickly learned suited my skillset and personality, and I began being successful. I also learned that I was a good engineering manager – ie. I could oversee large projects very capably so long as I didn’t have to implement the detail of the project personally.

The second time I was fired was for political reasons. I lost my mentor in a purge at the top of the company – he was a senior VP, and when the president retired, a new president came in and brought his people with him. My boss was let go in the subsequent purge. I attempted to tread the water and become a political animal. I was not good at it, and the new VPs brought in their new darlings, and eventually I was pushed out. And again I learned something valuable about myself – I am not a political animal, and I am not able to change those stripes. I abandoned all semblance of caring about internal manoeuvrings in the companies I worked for, and concentrated solely on doing my job. I became a turnaround manager – and went where plants and companies were in trouble. I was/am extremely good at it. I demanded total autonomy – and got it. I did not care whose toes I stepped on, or what political problems I caused. I focused on the job and only the job. I became much sought after. Companies that hired me knew I would perform, plus they knew I was not out to take anyone’s job at the top. I was actually there to save the people at the top. I would turn a company around and move on. Ultimately I bought into my own business.

The moral of the story is that until people fail, you do not know how they will respond, and it is critical to have this information about people you need to trust. Even though most people do not respond positively to failure, there are those that do. Failure offers the opportunity to reach new heights and concentrate on areas of excellence, if the person is prepared to learn from failure.

Most crucially, for me, having thought about this for many years, I have come to understand just how despicable and disgusting it is that our political leaders cultivate personal success from abject professional failure. They pay no personal price for their failure, and what they learn is that they need not be men of honor and integrity in order to maintain their positions, but rather they learn they can retain all of their trappings of wealth and success by telling ever larger and viler lies. They have learned that their citizens are as morally bankrupt as they themselves, and that they can influence these same voters with welfare, tax cuts, food stamps, and political favor. This flies in the face of all that is good and right, and until these events can be reversed, and until men of honor that learn positive lessons from failure are installed as leaders, and those that are morally bankrupt are displaced, the country will continue a rapid slide toward catastrophe.

I can’t take it anymore. Admin’s stories are putting me into a deep depression. So I have decided to fight back. Following are a few stories from my life that always bring a smile to my face when I think of them. Perhaps they will lose something in the retelling. But I will smile to remember them.

1) I was brought up around guns. We had all kinds of guns come and go through my home – rifles/handguns/shotguns/single shot/pump/semi-auto – you name it and it passed through. We were always trading guns with friends. It was sort of like the way some folks trade baseball cards.

One day, a friend of my dad’s was around, and of course wanted to see what new (not new new, but new to us) guns we had. We had a new semi-auto shotgun. The brand I have long forgotten. This particular gun had a particular little quirk – the loading mechanism was self-loading. You put the shell to the magazine, and ‘ka-ching ka-ching”, the shell would be loaded. Two pointy prongs would grab the shell and load it into the gun. It would also grab whatever else came near and load it into the gun as well. It was particularly fond of loading fingers – which was something you wanted to avoid owing to the pointy prong things.

My dad duly brought out the new shotgun, and handed it to his friend, who began examining it. He started to probe around the loading mechanism with his fingers. My dad said “you want to be careful of that or it will get you.” His friend replied, “It’s ok, I have one just like it at home.” This was immediately followed by “‘ka-ching ka-ching” and a loud howl – the friend had loaded his thumb up past the second knuckle into the gun. Without missing a single beat my father replied “And I bet you do that all the time, too”. (My old man was funny as hell.). Blood poured out of the opening – the sharp prongs had done their job nicely – down the man’s hand and arm and onto the floor. He was screaming “get it off get it off!” But my father and I were totally incapable of helping him – we were laughing so hard tears were streaming down our cheeks. It was by far the single funniest thing I have ever seen. It was the “I have one just like it at home” comment that was the cherry on top.

We finally stopped laughing long enough to get him loose from that gun (we got rid of it ASAP as it was a man-trap, for sure), and sent him for stitches. But every time we got together my father and I retold that story and would laugh like it had just happened.

2) One day I was sitting in my car outside a grocery store. I was in my early 20’s. In the parking lot and on the adjoining sidewalk there was a group of teenage girls talking. A boy of the same age was riding his bike back and forth – one of the old stingray types – and obviously decided it was a good opportunity to impress the girls. He began to do wheelies up and back along the side walk. He was pretty good at it, but the girls were feigning disinterest. After several passes, during a wheelie, he hit a bump in the sidewalk, which flipped him backward and sideways onto his back – and into a large pothole about a foot deep full of water. He climbed out of the pothole covered in mud and muddy water, and red-faced – with the girls snickering of course. I was perhaps 10 or 15 feet away.

Being the kind soul I am, I rolled down the window of the car, leaned out, pointed, and went “Bwahahahahahahahahahahahaha! Bwahahahahahahahaha!” He turned an incredible shade of purple and started cussing me, and picked up his bike and stalked off. The girls went from small snickers to full-on braying at this stage. Maybe you had to be there, but it sure was funny.

3) When I was a young teen – perhaps thirteen – a friend and I set out one summer day in search of adventure. We carried with us the holy grail of all boys of our age – a bag full of firecrackers. We had everything – black cats, cherry bombs, and the big daddy of them all – the mighty M-80. An M-80 would take down a mailbox or take your hand off if you weren’t careful (seriously). We loved M-80s. So off we went, in search of adventure, armed to the teeth with a bagful of fireworks.

We were country boys, and so there were lots of things to blow up, which we duly did. During our wander, we came upon a stack of irrigation pipes. These pipes were perhaps 20 feet or so long and maybe 8” in diameter. The stack was quite long – perhaps 20 yards long and over 6” high – in other words a huge wall of irrigation pipes. As we came to the wall of pipes, we noticed Farmer John on the other side of the wall working – we could see him through the pipes, but he had his back to us. We immediately hatched our evil plan. We took out one of our prized M-80s, and put it into one of the pipes as far as we could reach, at approximately Farmer John’s head height, and lit it and stood back several feet.

Anyone familiar with M-80s knows that they are loud – and I mean really loud. However, I simply cannot explain the way a stack of irrigation pipes is able to magnify the sound of an M-80 going off. It is the single loudest thing I have ever heard. It was simply ground shaking. And it went off at head height of poor Farmer John, who was only 3 or 4 feet away from the pipes.

We immediately crapped ourselves, because it was way more than we had expected, and took off across the field lickety-split, continuously looking over our shoulders (Farmer Johns were known to carry shotguns, and weren’t afraid to use them in such a situation). We had gotten well and truly away when Farmer John finally made it around the corner of the pipe stack, clutching both hands over his ears.

Nothing ever came of it – although he must have known it was us. We made ourselves scarce from Farmer John’s farm for quite a while, though. And my friend and I laughed about it for years afterwards. And it still makes me smile to this day. Sorry Farmer John.

OK – so there is a start. Let’s hear some of your stories that make you smile. We need a good laugh. And if you do a good job, I will tell you my “cherries” story, which is my family’s favorite story (largely because I am the butt of the joke). Enough of the Admin’s doom and gloom. Time to fight back. OK, let’s have them.

I have just read that in early August American workers finished working for the following three things: federal taxes, state and local taxes, and for the cost of regulation. In other words, people work approximately 7.5 months this year to pay for these things, and so only work 4.5 months a year for themselves. I knew that workers cover their federal taxes sometime in April (Tax-Free Day), and the rest of their taxes a month or two later, but I had never thought of how much work goes into paying for regulation.

I have always considered that regulations were largely a business expense – i.e. it costs the business to cover EPA/safety/employment regulations, but I really never considered how that actually flows down to the individual. But of course it does, and so in the end it is the working people of the country that pay for the regulations. It is tax by stealth.

The scariest part of the story was that the author said that because money was drying up (i.e. tightening of the budget outlays at all levels – federal, state, and local) that the politicians will be turning to additional regulation in order to achieve their political and financial goals. In other words, instead of direct taxes, they will be indirectly taxing citizens via regulation and the transfer of cost onto business. The author indicated that politicians will be forcing businesses and individuals to spend money via regulation as opposed to the government collecting it and re-directing it. Laws may be changed to transfer work onto employers/individuals that were previously undertaken by government agencies. In addition, there will of course be new regulations and reporting requirements. It seems politicians believe laws and regulation directed at business do not generate the outpouring of dissent as do tax increases on the general public.

I do not know precisely how this will unfold. It may be things such as 1) mandating that business take responsibility for the upkeep of the roads in front of their businesses, 2) requiring that businesses “self-audit” their taxes, 3) requiring that they employ a certain number of safety or EPA inspectors per 100 employees who then have to send the government reports each month, 4) requiring that they employ doctors or nurses to care for their employees, 5) requiring that businesses deliver their own rubbish to dumpsites, etc. etc. etc.

This scenario seems to me not only to be plausible, but entirely likely, and I have no doubt whatsoever we will see it occur. I have not as yet seen an escalation of regulation/reporting, but it is only a matter of time before it happens.

We desperately need to not only overcome the debt burden that has encompassed the country, but to also overcome the political mindset that all of the costs and regulation are needed. Transferring cost onto business, and thence onto the public, is not a solution to the overspending problem. It is sleight of hand and does nothing to address the real issue of overspending. We must demand politicians stop looking for ways to mask the overspending, and must insist they look to eliminate the spending entirely.
The prospect of increased regulation and business expense feels me with dread. The last thing small business people need is increased regulation. It is enormously difficult to run a successful small business, and each time regulation increases it further adds to the burden. If governments do indeed continue down the regulatory path, it is only a matter of time before starting up and running a small business will become unviable.

Given the size of TBP’s readership, it seems certain that a there are several hundred members who will be seeking new employment at any given time. The intention here is to provide a bit of insight into what employers are looking for in employees, in hope that that information will assist the members to land interviews, successfully negotiate the interview, and hold the job through the crucial first few months.

As an employer, I hire employees for one reason and one reason only – to help the company make money. I believe this to be a universal truth for all employers. I understand a great many people find this truth to be distasteful, and that some greater relationship, such as mutual loyalty, should exist between employer and employee. To them I say this: what you believe matters not – this is the way it is. Live with it, or do not. If you choose to not live with it, your lives will be harder and it will impinge upon a fruitful search for employment. So in your search for work, keep foremost in your minds at all times this thought – how can I show prospective/current employers that I will help them make money?

The Application

I do not wish to dwell on this area, but will only try to provide some generic advice on what I look for when sifting through job applications.

– I look for a cover letter specific to me and my organization, and do not wish to see a form letter.
– I look for a resume that is appropriate to the position. In other words, I do not want to see a five page resume when the person is applying for a machine operator’s position. Limit the resume to no more than two pages no matter what position is being applied for. Also, get it professionally done, no typos, and printed on quality paper (I recommend something other than plain white so that it stands out).
– I do not want to see that the person has job-hopped. If you have, try to devise a means of obscuring and/or explaining this. I also do not want to see a huge list, or any list, of personal interests. It will not be a positive, and will possibly be a negative if it leaves me with the idea that you partake in dangerous activities or so many activities that they may interfere in your work.
– I want to see what skills you have, and I want to know what you have accomplished. What you were responsible for is of lesser interest to me. A lot of people are responsible for many things, but accomplish little.
– I want to see that you can help me make money.

The Interview

Following is what I want in an employee, and these are the things that the applicant needs to address during the interview:

– I want an employee that comes to work. This is the single most important thing. I repeat, this is the single most important thing. Everything else runs a distant second. You need to get the fact that you will come to work into your application. In 40 years of work I have missed the following days of work: 5 days with pneumonia, 3 days with hernia surgery, 1 day with shoulder surgery, 1 day with a temperature of 104, 2 days with food poisoning. I have no time for people that miss lots of work – especially if they miss lots of single days. Miss a week with pneumonia or surgery – fine. Miss ten days a year one day at a time? Take that crap somewhere else. Some people think that this is harsh. I do not care – not one single whit. Come to work, or get lost. My company averages less than 1.5% absenteeism, and always has. That is three days per year per person, and includes long-term illnesses. As a result, I am able to very accurately plan and schedule my business, which helps me make money and compete in a world market. (There is that thing again – money.)
If a new employee misses a day of work in the first month, I raise an eyebrow and keep an eye on what is going on. If they miss 2 days the first month, it is unlikely they will maintain their employment.
– I am not recruiting for superstars. Superstars are too rare to recruit for. I am recruiting for hard-working individuals that come to work, bring a varied skill-set, and are willing to learn. I do not want to hear that a person can do everything – it is almost always bullshit. I do not want to hear that they are quick learners. Everyone says they are a quick learner. No one is ever a quick learner. I want someone who says they will come to work every day and who says that they are willing to learn and that they will keep at it no matter how long it takes. Funny enough, it is these folks that turn into superstars. People that apply and try to sell themselves as superstars invariably overstate their cases. Sometimes they fool me, and I put these folks in jobs where I find out that they are in fact not qualified. That costs me money. That is a bad thing.

– I do not want job hoppers. If I see that a person has held 5 jobs in the last ten years, they need to explain this in detail, and to convince me that this is not going to continue. This may be hard to do. But the best way would include an explanation that they were young, immature, and have reached a point in their lives that they understand the need to be stable. I spend a lot of time and money training and recruiting new employees. I do not want to see that money wasted.

– I want employees that treat the job and business like it is their own. That is to say, they do not waste money or resources, they treat equipment with care, they produce a quality product every time, etc. I want employees that do not waste time. Every minute an employee wastes cost me approximately $1. Really. Say I have 130 employees and they all waste 10 minutes a day (I am sure it is far, far more than that) that is $1300 dollars per day wasted. Or about $300,000 per year wasted. Of my money. I can stroke out just thinking about it. So I want to hear that potential employees will not waste time, and that they will care for the business as though it is their own. So in an interview say exactly that – “I will not waste time and I will take care of your business just like it is my own”. See how fast you get hired.

– I want employees that fix their own problems. I do not want employees that bring me a never ending stream of problems they have identified. Most issues are not rocket science, and the employee can fix the problem themselves. And I do not want employees coming to me every time they have fixed a problem to crow about it. Blow your own horn, but do it infrequently. I am not blind – I can see. Let your prospective employer know you are this type person. It saves them money.

– I do not want anyone that is a pain in the ass. I want people who treat others with respect. I do not want people who are complaining all the time. I have enough trouble running a business, and do not want to be a babysitter too. It wastes my time and costs me money.

– There are two areas that every employee has absolute authority over –safety and quality. Employees are empowered to shut down any operation that is unsafe or which is spitting out bad quality. I want employees that understand that this is the case – that they are not helping me if they allow unsafe practices to continue or allow bad product to get out the door. Bad quality costs me money, as do any injuries – and injuries can even get me in severe legal trouble. I want people to keep me out of trouble.

– In interviews, I am always concerned if the applicant focuses too much on working hours/vacation days/sick leave provisions/etc. Perhaps it is all reasonable to ask, but it worries me nevertheless.

This list isn’t comprehensive, but it covers the basics. As is evident, it all comes down to money – helping the employer make it and save it. Applicants that show that they are focused on this will be successful. It will overcome a vast array of other deficiencies. For instance, I employ several ex-cons, people with learning disabilities or poor educational skills, ex-drug addicts, etc. etc. etc. For the most part, I do not care about that stuff – I care about whether they help me make money. In many cases I take a chance on people if I think they can help me make money. When I take a chance, I know that the odds are that I will not be successful – for instance, drug addicts relapse. But then again all new hires are something of a crap-shoot.
Here are some examples of how applicant have shot themselves in the foot, and lost the opportunity of a job, or have lost the job themselves:
– In an interview, the applicant told me that they couldn’t work past 3 on Friday, as he played golf then. He was stunned when I showed him the door immediately.
– A receptionist called in sick with a migraine on her first day of work. I advised her there would be no second day. She couldn’t understand it.
– A young man missed 3 days in the first month of work. When I spoke to him about it, he asked me what my problem was as “it is only 3 days in a whole month”. I showed him the door on the spot. The young man’s father showed up to threaten me for mistreating his 23 year old son. That didn’t go well.
– A painter with “10 years’ experience” baked 2 high value spray guns in 2 days. Baking the gun cooks the paint inside the gun and destroys it. Adios, amigo.
– A new hire clocked out without notifying anyone at 9 and came back at 1:30. When asked what that was about he said he had things to do. See you later.
– A new hire was leaping off the top of a dumpster onto his ass inside the dumpster “to compact it”. Do not pass go on the way out.
– A new hire emptied the trash out of his car (lunch bags/ashtray/newspapers/etc.) onto the ground in the employee parking lot. He thought that was fine. I didn’t.
– A new hire started a fire in an employee restroom as a joke. I laughed and laughed.

So, in summary, job applicants need to keep in mind exactly what the employer wants, and needs to convince the employer that he/she will deliver the goods. The employer wants someone to help make him/her money, and who will not be a pain in the ass. It really is that simple.

I hope that this is some help to those looking for new employment. I also hope that those many members with great experience can add and augment to this post. I know that many believe that the world should be a kinder, gentler place. Perhaps that is correct. But it doesn’t help today’s job applicant, who must live in the current reality.

On a recent thread, Buckhed brought up the issue of property rights, and how they are being extinguished in the US. He rightfully pointed out that eminent domain was being used in order to acquire property for reasons other than those we have historically allowed – for instance, private dwellings are being taken so as to allow the development of industry/business, as it is deemed to be for the betterment of the community. Compensation for the acquisition is being provided to the owner, so I do not believe that property rights have been entirely extinguished in these cases.

However, as a businessman and owner of a manufacturing company, I have had many hundreds of thousands of dollars of my property rights extinguished without compensation. The extinguishment of company property rights has received very little, if any, attention from the media. The public in general would be clueless, or perhaps disinterested, that it is occurring. It is a major reason that manufacturing is leaving the country. The extinguishment of property rights is one reason manufacturers talk about “business uncertainty” and the pressure the uncertainty places upon them to abandon the US.

I invest heavily in equipment and plant. Over the years, regulations regarding health and safety change. Whenever there is a change in these regulations, some portion of my plant and equipment becomes instantly obsolete, and I lose the capital value of the affected equipment. For instance, when there was a change to the fire safety standards for my industry, I had to remove all of my facility’s lighting and replace it with “flame-proof” lighting. This cost many tens of thousands of dollars. I was in no way compensated for the old lighting, nor was I assisted with the cost of the new. When I asked an inspector what allowance was made for those companies without the capital to change the lighting, he said simply that he closed them down. No allowance for transition or capital costs was to be made. A couple of years later, a different inspector came through, and decided, based on his own interpretation of the regulations, that the lighting I had installed was insufficiently bright, and posed a safety hazard to my employees. I was required to further upgrade the lighting, at a cost of several tens of thousands of dollars. I, of course, lost my previous investment.

This scenario regarding safety has played out many, many times, at a cost to my company (i.e. to me and my partner) of hundreds of thousands of dollars. Other examples include upgrades to presses, to fork lifts, to paint booths, to electrical supply, etc. etc. etc. Each of these items was purchased and installed in good faith to prevailing regulation. And each of my investments was extinguished without compensation.

The scenario is very similar with regard to the EPA. They regularly change their regulations and interpretations. As we deal with the transport and automotive companies, the uncompensated costs to the industry are in the many billions of dollars. The cost to change engines to meet reduced missions targets is extreme. And when the engines change, so do the vehicles themselves. Previous investments on plant/equipment/tooling are lost in their entirety. I have lost hundreds of thousands of dollars when EPA regulations have changed, owing to the need to re-tool and re-equip, and to upgrade plant.

Recently, our local government changed its interpretation of zoning in our industrial estate, and we no longer meet the zoning regulations. We have been at our site for decades, but we are now fighting the rezoning. So far we have invested tens of thousands in the fight against the rezoning. If we lose (it appears we will be successful) the cost will be in the hundreds of thousands of dollars. We will receive no compensation, win or lose.

An additional area where regulations change is with regard to employment law/tax law. Continuous investment must be made to maintain compliance, and old investment becomes obsolete (software/personnel training/etc.). This seems like it would be a modest amount, but in fact it is substantial, albeit difficult to quantify.

It is my opinion that the major property rights issue in the USA is not related to private individual rights, but rather to property rights of corporations. The federal/state/local governments routinely strip value from corporations with no compensation. Their actions cannot be forecast, and are often driven by a small interest group. In addition to adding substantial cost to business, this situation creates business uncertainty, and as a result businesses stop investing, and look to take their businesses to areas/states/countries where there is more certainty.

It is no surprise that manufacturing in the USA has collapsed. The cost associated with the extinguishment of property rights is extreme, and growing, and the uncertainty factor is ever increasing. When these costs are combined with labor-rate differences, it is no wonder that manufacturing is fleeing to lower cost locations. Small manufacturing entities are trying to compete globally, against lower cost nations that provide greater certainty of capital investment protection. It is no wonder that they are struggling.

I have advised that people think long and hard before they buy into or found a manufacturing company, or any small company for that matter. There is extreme risk involved, and you simply cannot trust the governments to help maintain your investment. They can, and do, extinguish your property rights at a whim, and can send you broke overnight. Until governments begin to create a stable environment and give assurances that investments made will not be extinguished, then I expect businesses to keep fleeing to low cost and more stable environments.

Recently, I have been reading a range of comments on TBP that indicate that companies are doing the wrong thing by failing to protect the jobs of Americans and by exporting jobs overseas. Although I do not believe that a company has a direct responsibility for maintaining jobs as such, I am horrified by the number of jobs that are lost as a result of corporations doing the wrong thing by their shareholders, and to that extent I cannot disagree with those that wish to hold large corporations accountable for the loss of jobs to low cost countries.

It is incumbent on the American people to help keep jobs on shore – buying American made goods and using only American supplied services, and maintaining/creating the world’s highest skilled workforce would help the situation greatly. However, the American people long ago abandoned job creation and maintenance, and instead opted for the cheaper overseas made product, and the result has been a steady loss of work to cheap labor countries. So much work has now been lost that it is nearly impossible to determine the overseas component of many products (for instance “American made” cars contain a large overseas-made component).

I deal with a number of large, multi-national businesses. Each has a system to rank its suppliers based on a range of criteria, such as: on-time delivery, pricing, quality defects, engineering excellence, warranty claims, packaging, accuracy and timing of responding to request for quotations, etc. These large companies publish the results yearly, ranking suppliers against each other so as to drive competition. Some of these companies have annual meetings to reward the winners of the “competitions” (and shame the losers). I was at such a meeting recently.

The winner of the year’s supplier “competition” got up to receive the award, and gave a short speech. The winning company excelled in all of the measured areas. The CEO, during his speech, told the assembled supplier and customer representatives that his company would not win the supplier award next year, as the customer was taking its business elsewhere (where else but China?), as they could source the product cheaper there.

In the end, the customer ignored all of the many benefits of having a superior supplier (in fact its best supplier) with state of the art technology and a committed and skilled workforce, and instead opted to source the parts from a country that could supply the parts for a few cents cheaper. This is indeed a sin and an outrage. It shows no commitment to the long-term success of the customer’s business, and hence destroys shareholder value. In the end it was a decision driven by a lower-level purchasing agent that was paid a bonus based on the savings he generated yearly. There is little or no avenue of appeal for the supplier given the new contract has been let. The supplier has other customers, but a number of jobs will be lost to an overseas company.

As a business owner/manager, I have no specific responsibility to anyone other than the shareholders of the business (there are a great many legal responsibilities, however). If business needs dictate, I would, and do, eliminate jobs as is necessary. But I do so based on a long-term view and for the long-term health of the business. And I do not allow my purchasing representatives to change long-term suppliers without my direct consent. I give my suppliers every opportunity to respond and rectify issues, and I generally pay a modest premium for the relationships we have with our suppliers. The extra costs repay themselves time and again when there are problems that need to be resolved or when an emergency occurs. The cheapest suppliers do not tend to be able to respond in times of crisis.

Large companies have set systems in place that manage and measure every individual aspect of their businesses. Each small portion of the business is set goals to achieve. Individuals within each sub-section tend to be compensated for achieving their short-term goals. There tends to be no master strategy, and the small cogs (low level purchasing managers, for instance) can have very serious effects on long-term outcomes, especially in the aggregate where perhaps 100 purchasing agents each drive a few jobs overseas every year as they search out short-term profits. There of course can be a number of sound reasons for sourcing overseas – lack of skilled employees, extreme high costs, low quality, etc. But to continue to lose jobs because of short-sighted low-level purchasing officers and their ilk is an abomination.

To change this situation would require an entire shift in large corporate cultures. Given that CEOs and board members are compensated for short-term outcomes, I do not believe it is possible that such a shift will occur. The American people can have the most impact via their buying patterns and by refusing to accept overseas services. It is perhaps far too late.

Some twenty plus years ago I came to work for a company we will call AJAX. This company was founded in the 1930’s, and remained in family hands until the 1980’s, when the CEO bought it from the founder. In addition to its primary business of industrial supplies sales, the company manufactured a range of commercial widgets. The industrial supply side of the business was the dominant part of the business and represented in excess of 90% of its sales and profits. Manufacturing widgets was a sideline.

One large multinational organization dominated the US widget business. The multinational decided it was time to modernize its manufacturing facilities world-wide and built two identical plants – one in the US and one overseas. These plants were identical in every way – same size facility, same equipment, etc. Foreign markets would be supplied by the overseas plant and local markets by the US plant. The company quickly found – much to its disgust – that the local plant produced only half as many widgets per man-hour as their overseas plant, despite being identical. Additionally, local labor costs were dramatically higher. The reason for this was simple – the new local plant was built at the same site as the previous plant, and used the same employees – highly unionized and militant employees – who refused to run the new equipment beyond the capacity of the old plant. When the multinational realized that they could import widgets cheaper than they could make them locally, they closed the local plant entirely and built a second new plant overseas to supply the US market. Goodbye jobs, hello imports, thank you militant union.

The owner and CEO of AJAX noted the closure of the plant with interest – and determined there was an opportunity. He decided that he could take over the entire US market for widgets, by building a new widget plant in a non-union part of the country, and thus saving the not insignificant transport costs his competitor incurred. He believed AJAX could dominate the market on price and by promoting the product as local made.

The owner put together a business proposal for building the new plant, and went to the banks for the $25 million required to build the plant. The bank was suitably impressed – after all the business was long-established and profitable, and further the CEO/owner was also personally guaranteeing the loan via his personal wealth of some $10 -15 million.

The CEO immediately hired a flash young manager to manage the new facility, an experienced engineer to design and commission the facility, a new accountant to account for all the expenditure, and he also hired the most experienced sales manager of widgets in the country (indeed he hired the only experienced sales manager in the country – the sales manager from the competitor that moved overseas). Of course there were a range of other personnel hired as well – planners, supervisors, engineers, etc.

The story now jumps approximately two years forward. The plant has been built, and has largely been commissioned. Unfortunately, it is running at only about 10% of design capacity. The plant is fully staffed, and is bleeding money by the hundreds of thousands of dollars per month. The initial bank loan has blown out to over $35 million, and the parent company is going broke owing to the ever increasing losses and inability to fund the interest bill. The bank is desperate to try to recover some of their money, as the plant is virtually worthless in its current state, and the only really security they have is the CEO’s personal assets. They demand that a new manager be brought in to run the plant. And that is where I come in.

The bank recruited me to take charge of the plant, but allowed the CEO/owner to remain in place, and had me report to him. This would prove to be a terrible mistake.

All manufacturing and engineering personnel reported to me, including the previous young plant manager. I quickly discovered that this flamboyant young manager had been using huge slabs of company resources to assist him in building his new house. This was well known among his employees, but as they worked for him, no one said anything. As the CEO was located in another city, he did not know it was happening – although he surely should have known. I summarily dismissed this young manager, and suggested he be charged for various crimes. The bank and the CEO opted not to do so, for fear of negative publicity. I do not understand that reasoning, but it was not my call. This young manager, to my understanding, never again succeeded in resurrecting his career, lost his partially built new house, and disappeared from sight.

Every three months we undertook a complete physical count of inventory. I was in charge of this inventory count. I would oversee the count, and send it to the accountant for pricing and summation. The accountant would send it back to me for final verification. I completed the first count, and received back the summary for verification. There I caught a $1 million dollar discrepancy – the accountant had keyed in 10,000 widgets when there were in fact only 1,000. I duly documented the discrepancy, and notified the accountant both in writing and verbally of the discrepancy – after all, a $1 million discrepancy was nothing to ignore. Three months later we undertook the same process. I did the count, the accountant did the summary, I verified the count was accurate – and sent it back. I immediately received a call from my panicked CEO – the count was off $1 million, and he wanted to know how I had lost a million dollars of stock. It took me about 2 nanoseconds to realize that the accountant had screwed the pooch – and that despite my best efforts, he had not fixed his mistake. The CEO went very quiet at my explanation, and I could sense his fear (not unexpected, given his personal fortune was hanging by a thread). The idiot accountant was never again heard from, and I understand his career in accounting was over from that moment.

The CEO made a series of catastrophic errors, each leading him ever closer to his doom:
1) The CEO made the fateful decision to abandon his core business of industrial supplies and enter manufacturing on a large scale. He had no experience in manufacturing. He then made a series of errors in hiring the wrong personnel, and of letting overheads get away from him, costing some millions of dollars.

2) The CEO, at the age of 55, guaranteed the $25 million loan (which then grew substantially) with his substantial personal wealth.( I and my partner never personally guarantee anything. We are too old to recover should anything go wrong.) This was a fatal mistake for the poor old CEO.

3) The CEO opted to interfere in my daily handling of resurrecting the business. This was somewhat understandable, as he could see his personal fortune disappearing, but it was a terrible mistake. There were two incidents where his interference cost him dearly. I had developed a spread sheet for ordering parts – a very basic MRP system that was not very pretty but was effective. The CEO saw this spread sheet, and determined that his system was better (i.e. prettier), and took upon himself the task of ordering 1) the high dollar imported products we needed in widget manufacture, and 2) the order of the high dollar specialty steel we required. Upon receiving the containers of imported product, we discovered he had ordered the wrong parts – some $500,000 of wrong imported parts, that were, of course, non-returnable. Upon receiving the steel, we discovered he had ordered the wrong steel – again $500,000 of steel that could not be returned. In a time of crisis, the CEO blew $1 million dollars. The bank, of course, was not amused. He decided it was best to leave me to do the ordering in the future.

These errors, unbelievably, were not terminal, and were in fact recoverable. I managed, over the course of a few months, to get the plant fully operational. In fact, if the interest on the bank loan was ignored, the plant was making a modest to reasonable profit, and the future looked pretty good. Unfortunately, the CEO had made one more error that had yet to come to light.

When the plant was fully commissioned and up and running, the CEO, the sales manager, the bank and myself sat down to discuss the next step. The plant was fully operational, and needed to be filled with orders. The CEO turned to the sales manager and said, “Sales manager, go forth and sell, and bring in orders for 1 million widgets, as that is the plant capacity”. The sales manager sat there and blinked, and was quiet. Finally the sales manager spoke – he said “The entire US market for widgets is only 200,000 per year.” This was a fateful comment indeed.

It seems that the CEO had used the figure of 1 million widgets per year in his business plan to the bank. He had never confirmed these numbers with anyone, and no one knows how he came by these numbers. The bank accepted this information (heads rolled at the bank over this), and loaned $25 million (and expanding to $35 million over time) based on these fictitious numbers. The sales manager was not with the company when the figures were created. Nonetheless, he knew that the numbers in the business plan were incorrect, but decided not to tell anyone, as to do so would likely have meant losing his job. He was over 60 years old, and his entire career had been spent selling widgets, and he believed he could not get any other work, and so he kept quiet until he could no longer do so. He was unethical in the extreme.

So, in the end, the CEO went bankrupt and lost his company and his wealth owing to his mistakes and his personal guarantee of the loan. His wife of many years left him (it seems to be a common theme). I have heard little of him since.

The sales manager lost his job owing to failing in his fiduciary duties. He disappeared from sight.

The bank took ownership of the business, and eventually sold it for a fraction of the monies owed. It was recapitalized at a value, including the industrial supplies arm, of approximately $15 million, and generated a reasonable profit at that valuation. The bank in the end lost about $10 million. The 100 or so manufacturing employees got to keep their jobs, which was a great result. I moved along to the next stricken company shortly thereafter, having accomplished my goal of saving the plant.

In this tale there is arrogance aplenty, there is unethical and criminal behaviour, and there is sheer incompetence and stupidity. But when I think about this story, I keep coming back to something I have long believed – that there are simply very few people out there who are capable of effectively running complex organizations – it takes a lot of skill, experience (both diverse and in-depth), and talent. There are a great many people who are incompetent and a great many more that simply do not care.

As a nation, we are an incredibly complex entity. We rely on politicians, for the most part, for leadership. These politicians are frequently life-long politicians or academics, with little or no real-world experience, and in many times they have entered the family business of politics (think Bush and Kennedy and Paul). And yet we rely on them to formulate and implement solutions to very complex solutions. For the most part, they simply are not up to the task – they do not have the requisite experience or skill. People with the appropriate skills and experience, as rare as they are, tend to avoid politics like the plague.

And so I despair when I consider the future – who will lead the people? I am convinced that politicians have insufficient skill, experience, and perhaps most importantly, the will to do what needs to be done. The American people show no inclination, on the whole, to reject the politicians we have for those we should have. So the grave question remains – who will save the country in the time of coming crisis?

This is a story that I became aware of yesterday. It is a tragedy, and I think bears repeating.

Several times per year several of us, along with our wives, get together for fellowship and to discuss our business interests. We are like-minded individuals, and all own or operate small to medium sized businesses. We have been friends for many years. We had one of these lunches yesterday.

I was sitting next to one of my old friends and asked him how his business was going. He teared-up and could barely speak. He and I went aside to talk.

My friend is in his mid-seventies. His business is seventy five years old and was founded by his father in the Great Depression. His father nurtured and grew the business even during such hard times. My friend worked alongside his father for many years, and in due course the business became his. That was some forty years ago.

The business deals in relatively high dollar projects with six to twelve month lead-times. My friend slowly, steadily, patiently grew this business from a mere gosling to a full grown goose laying steadily more frequent golden eggs. Each year the business grew, added more employees, increased the size and scope of its projects, and became more profitable. It was never an enormous change year on year but rather was a steady and measured growth. The primary competition was originally local but gradually began to be centered overseas.

The business is and was always a relatively low margin business. Profitability relied on accurate quoting, highly skilled and experienced employees, and a set of rules that were developed over many decades. First among the rules was that the business always declined to undertake contracts above a certain size. The contract size undertaken would only expand as my friend determined that the business had the requisite skills and resources to do such larger contracts. Generally, each year the company could undertake slightly larger contracts. Currently the company has sales of approximately $10 million per annum, and employs dozens of people.

About twenty years ago my friend began to groom his son for succession. He sent him off to college to get his degree. Upon his return from college, my friend began the painstaking process of preparing him to one day assume control of the business. The son worked on the shop floor, in engineering, in quoting, in sales and administration. He was given experience throughout the company. Slowly he began to make major management decisions, carefully supervised. His biggest flaw was that he had the rashness of youth – he was constantly advocating for larger contracts and faster growth of the company. My friend was very patient with him and passed on the wisdom of many decades.

My friend was anxious to retire given is increasing age, but did not feel his son was quite ready. He stayed on, slowly reducing his hours, giving his son more authority, and checking his progress. His son was learning the lessons – jobs were accurately quoted, contracts were kept to an appropriate size, and profits were maintained.

Finally the day came when he saw that his son was ready. My friend was 73 on that day 18 months ago. He sold the business to his son on very favorable terms (the son borrowed against his house for the purchase) and ever so tenderly handed over the golden egg laying goose to his son, and proceeded to enjoy the fruits of his decades of labor – nice car, lavish holidays, etc. with his wife of many years.

The son, henceforth to be called the Idiot Son, roughly grasped the goose and ran off shouting “At long last I am King”. The die was cast.

With the first golden egg laid the Idiot Son ran down to the bank to show them its magnificence. The bank was duly impressed, as the company was profitable, the order bank strong, and there was a 75 year history of success, and so granted him a bigger mortgage to finance a much larger home for himself and his family. The goose was not too much troubled by this, as the golden eggs flowed freely still. It had been about two months since the business was passed along.

Then the Idiot Son ran down to the Mercedes dealer and borrowed the money for two AMGs – one each for him and his wife. The goose honked a bit at his folly, but still the eggs came and the goose was only slightly troubled, as surely more eggs would be laid. The Idiot Son took out more loans against future eggs and bought a new Harley and a new speed boat as well, and a nice vacation. The goose was concerned by this as never before were future eggs pre-committed, but there seemed there would be enough eggs to cover the debts. It had been about three months since the handover to the Idiot Son.

The Idiot Son decided that the current offices and factories were not grand enough for a man with such a magnificent goose, and so moved to far grander premises. The new premises were more than $100k per year more expensive than the previous site. The goose did not know this had happened. The Idiot Son, seeing that he could not reach his growth targets without extra engineers and administration and salesmen immediately recruited the finest of these he could find. Fine they were, and appropriately expensive. The goose was blissfully ignorant of this and kept laying magnificent golden eggs for the Idiot Son, not knowing that each egg had already been committed. It had been about 8 months since the Idiot Son took charge.

The fine new salesmen went out and found the nice large contracts the Idiot Son so desperately wanted. The fine engineers and estimators defined the work and quoted the jobs, and secured the large contracts. It was now 9 months since the handover. The old jobs were being completed and the new jobs were starting. The goose was now terminally ill, and would soon die.

Fast forward a further 9 months to yesterday, and the goose is long dead. The company just went bankrupt, and all the employees have been fired. The Idiot Son has lost all of his possessions including his house. His wife has left him.

The magnificent goose would have been able – just – to survive the outrageous spending of the Idiot Son. But the Idiot Son did not realize that the first nine months were financed by the contracts already in place when he assumed ownership. These projects were profitable and followed the established rules of the business – his father’s rules.

During the second nine months, the Idiot Sons jobs began to flow through. They were accurately costed – that was not the problem. The problem was the jobs were too big for the organization to complete – there was not enough skill and experience available and insufficient time to train new people. Overtime began to gnaw on slim margins, and late penalties kicked in. Each job lost money – lots of money. In the second nine months the jobs lost in excess of $1 million dollars. In combination with all of the personal and company debt, which could only be funded through continued profitability, the huge loss resulted in the bankruptcy of the once fine business .

In 18 months the Idiot Son destroyed the magnificent work of two lifetimes, cost many dozens of people their jobs, lost the Idiot Son all of his possessions and his family, and caused $10 million of annual work to move overseas. With the multiplier effect, the Idiot Son may well have stripped more than $50 million out of GDP. He accomplished this all by his idiot self, despite the years of careful training he had received. One single idiot did all of this damage in EIGHTEEN months.

Some of you have asked for stories of Evil Banksters and Corrupt Corporations and the Free Shit Army. I have some of those, too. But I am here to tell you there are a great many forces destroying the country – forces that largely go unseen. This Idiot Son is one such. One imbecile has caused untold millions of dollars’ worth of damage to the economy of the country – perhaps even hundreds of million worth if projected forward some many years. The Idiot Son is despicable in his arrogance and stupidity. He wanted instantly what it took his father decades to build for himself. I cannot fully express my disgust.

The great tragedy of this story is what happened to my friend. He has seen, suddenly and unexpectedly, the death of a company that he and his father built over 75 years. He has seen people that he has worked with for decades lose their jobs. He has seen his legacy die because of his Idiot Son. He is inconsolable. He is fine financially, but I do not believe he will ever be the same.

In eighteen months one idiot caused all of this devastation. It is truly a disgrace. Beware the Idiot Son seems to be the moral of this story, as I am afraid they lurk everywhere. May God save us from idiots in whatever guise they assume.

This is a story about a young family, and takes place in the late 1950’s and early 1960’s, in the South-western US (primarily Texas/Oklahoma and Louisiana). This family consists of a young man and his wife, and a small child. The family work and travel with a carnival, and move each week to a new location. The small boy attended a new school each week from first grade through third grade. The exact number of different schools is not known, but best guess is around one hundred. Sometimes he was placed in the appropriate grade, but as often as not he was placed in a class wherever there was a desk – perhaps it was in third grade, or sixth, or first. This was, after all, the southwest, and they were, after all, carnies, and the schools would have preferred he was not there at all. The boy was resilient, and thrived, and knew no other life.

http://decker.typepad.com/photos/uncategorized/carnival_1.jpg

The young woman is a daughter of the Depression. She grew up in Missouri, and her very large family was from the lower-middle class. The family was hit hard by the Depression, but not quite so hard as some. Her father did whatever necessary to see that the family survived. How she came to meet and marry the young man has never been well understood, and on the surface they were poorly matched. The young woman was a gentle, kind soul, and the young man was from a vastly different background, and he was …. difficult.
The young man was a Dustbowl Okie. He was born into severe poverty, into a large and dysfunctional family. He left school at third grade, and began full-time work to survive – farming was his primary job. At some point during his youth he began working and travelling with carnivals. His life was very difficult. Somehow, after some very hard years, he met and married the young woman.
The story now jumps to when the young boy was five. The family owned/operated several stalls on the carnival – three game venues and a Fun House (effectively a large semi-trailer that had been converted into a House of Horrors), and the young man also rode an Indian motorcycle on the vertical walls of the Motordrome. The young boy did his first work at this time – he was the main ticket salesman at the Fun House. Unusually, the boy was perhaps a bigger draw card than the Fun House itself, for the boy was able to sell tickets and make change for any combination of bills and coins and customers. This talent drew a great many customers who tested the boy’s skills – some out of curiosity, but a fair number hoping to perhaps cheat the boy – something they never achieved. The boy also had some duties at the game stalls. His favourite duty, however, involved the Fun House. In the Fun House, where two aisles adjoined, an ankle high hole had been cut in the dividing wall. This area was pitch-black. The boy would sneak in the back way, and reach through the hole and grab the young ladies’ legs as they walked past. The ladies reacted as you might imagine – screaming/stomping/ and stampeding their way through the rest of the Fun House. Some even wet themselves. The boy thought this was great fun. So did the girls’ companions.
The main point of this story involves the three games the family owned and ran. These three games were the Bear Pitch (where customers would toss coins into plates sitting upon the heads of stuffed bears in hope of winning a bear), the Fish Toss (where customers would toss ping pong balls into small fish bowls in hope of winning a goldfish) and the Coin Roll (where the customer would roll coins down a ramp in hope of winning more coins). The young man developed these games personally, and paid the owner of the carnival weekly rental for space, plus a percentage of the gross (how this was calculated is uncertain, as carnies were notoriously unreliable). The young man was, therefore, a small business owner.
The young man had a particular genius – he was able to discern, unfailingly, what motivates people. The games he developed reflect this ability. The Bear Pitch was targeted to families, and to young couples. The young man decided that he was not in the game business – he decided he was in the business of selling Teddy Bears. And sell them he did – literally by the thousands. He designed his game such that anyone throwing enough nickels would “win” a bear. To win a bear, on average, might take $5 worth of nickels. Some people would win a bear with the first nickel, and some would take $10 worth of nickels to win a bear. But EVERYONE would win a bear. If anyone went too long without “winning” a bear, the young man would give them one. People lined up around this game ten deep. Everyone would win a bear – a large bear too big for a small child to carry. The young man sold a semi-truck load of bears each week – he would bring a semi-load of bears to each new town. Every family and couple who came to the carnival would leave carrying one or more of his bears. He was a great teddy bear salesman.
The Fish Toss was targeted to children. A stack of hundreds and hundreds of small fish bowls, filled with colored water – blue/green/gold – and a single goldfish was placed in the middle of the game tent. People would buy ping pong balls to toss at the bowls – throw a ping pong ball into the bowl, and win the fish. Children loved the game. It required no skill. Throw enough ping pong balls – sometimes one, sometimes twenty – and you would get a fish. Everyone could win a fish – and everyone did. The young man realized he was in the goldfish selling business, and he sold goldfish by the thousands (please do not ask about the goldfish survival rates – I doubt they were good. Never mind.). So in addition to all families leaving the carnival with his bears, they also left with his fish – no exceptions. They left very, very happy.
The Coin Roll was targeted at the final demographic group – young men without dates. The young men would roll coins down a ramp, and attempt to get the coins to land within a defined square without touching the lines. It was pure gambling. If you were successful, you made many times the value of the coin. How the young man figured out how large to make the squares, I do not know, but he did. It is an exercise I undertook in graduate school probability and statistics, but the young man had no such skills. This game kept the young men occupied, and they seemed happy enough to keep the game running steadily.
So the young man had a thriving small business, and was making good money. He sold many, many bears and goldfish at good margins, and made some nice side money on the Fun House, the Coin Roll, and his work in the Motordrome. He was fulfilling his customer’s needs. He had identified every demographic group, and gave them something they all wanted, and they were happy. The owner of the carnival was happy – more people were attending the carnivals than ever before. It seemed it was a recipe for success! Unfortunately, it was a very flawed business model, and ended in tears for the young man and his family.
The problem was that while the young man was thriving, the other games on the carnival were dying. The other games were rigged – they had no intention of giving anything away. Their business model was to cheat the customer, take their money, and move on. The honest nature of the young man’s games meant that no one would play the rigged games. After all, customers are not stupid – they prefer to get something for their money. So there was an uprising among the other game owners. They did not want to compete, and change their games – they wanted to continue to steal their customer’s money. They did not believe in the business model that fair games would result in more and happier customers. The believed that the old model – come for a week, take all you can without giving anything in return, and moving on – was the appropriate model. The other game owners demanded the carnival owner no longer allow the young man and his family to be part of the carnival. The owner resisted, but in the end caved in to their demands, and the young man and his family lost their business and their investments. What happened next is for another story.
So what happened here? The young man put together an honest business supplying a product that his customers wanted, and the customer was happy. He failed to fully understand the industry he was in. The industry was largely unionized – but he did not know it. The “union” did not want real competition, but rather wanted the status quo. They wanted something for nothing, and wanted to continue to steal from their customers indefinitely, and provide nothing in return. The carnival owner realized the young man had a valuable and promising business model, and understood that the customers were responding to the new model with enthusiasm. But in the end, the carnival owner was unable to bring himself to challenge the union. The honest, hard-working young man was in the end crushed by the dishonest union. Carnivals have declined markedly over the years, and have never re-invented the old model. Perhaps they missed their chance.
I have learned much from this story. From this story, there is the warning that aspiring business owners must see the pitfalls of not understanding their industry – many times it is much more complex than it appears. To be successful, business owners must fully understand their industry.
The union of stall holders very much resembles every other union that I have known. They are concerned with protecting the old ways, at the expense of the new. They wish to receive something for nothing, and long-term consequences be damned. They are prepared to crush anyone who challenges the status quo. Those of you who posted about the experience of putting out too much work as memebres of a union, and then having the pressure of the union applied as a result understand clearly how this works.
The carnival owner is similar to management that cave in to demands, but mostly to me he resembles the governments which for so long have rolled over for the public servants, and have allowed the public service unions to steal from the public. At least when private companies cave in, the penalty is (generally) only born by the shareholders. When the carnival owner rolled over, he allowed the carnival union to continue to steal from the public at large and in the end the carnivals have declined almost to the point of disappearing entirely.
I do not believe that the young man ever fully understood what had occurred, as he had limited education and experience. To him, he had done the right things, and was punished nonetheless. It added to the bitterness of his life, although he moved on to other things. Perhaps others can learn from his experience. I know I have.

In recent days, there have been several discussions recently on this site regarding unions and their activities. I have had a bit of experience in dealing with unions over the years – and none of it has been positive. Following is one of my experiences with unions.

In 1988 I joined a major international company, and was brought in, along with several other senior managers, to turn around a failing major consumer goods facility located in a small, rural town of 10,000 in the Midwest. The facility employed approximately 2000 people, and was heavily unionized.

The history of the facility was this: the original company was established approximately 60 years prior. A range of products – all heavy metal goods – were manufactured over the years. The original company was privately owned. The founder passed the company to his only son in the 1950’s. The son married, and the couple was childless. The company was by far the major employer, and the couple treated the employees as though they were family, and never attempted to maximize profit. The employees took advantage of this, and made substantial demands, always granted, during each contract negotiation.

The couple of course aged, and there were no heirs. In the early 1980’s the man died, and the wife sold the business to the multinational, as she wanted to ensure its continuation, for the welfare of “her family”.

At this point, the company employed approximately 2,000 people. The average wage for, primarily, unskilled assemblers was a bit more than $20 per hour. The company was by far the biggest employer in the area – the town was almost 100% reliant on the company. House and property prices were near the highest in the state. Schools were well funded. There were signs of prosperity everywhere – cinemas, restaurants, beauty parlors, etc. flourished.

Unfortunately, the facility was not making a profit – it had begun to lose money owing to overseas competition and the steadily rising costs associated with granting the employees their every demand. The new owner had bought the company not for its profits but for its customer base. The new management team was brought in to make it profitable, or to close it down. The men in black hats arrived.

Within several weeks we had come up with the solution. The parent company was prepared to let the facility continue, but it had to generate an appropriate profit. Wages needed to drop to a more appropriate level of $15 per hour, and serious investment in current technology needed to be done to drop the workforce substantially – to approximately 1000 employees. The savings looked for were in the vicinity of $50,000,000 per year. Otherwise, the facility would be closed, and a new facility would be opened in North Carolina, with wages of $10 per hour, and where generous subsidies from state and local governments existed. It was expected that the savings from moving to North Carolina would be approximately $65,000,000 per year. The parent company was prepared to keep the Midwest facility open and wear the $15,000,000 difference – a testament to its goodwill, in my opinion.

We had a contract with the union that was expiring inside of a year. We called the union representatives together, and laid this out for them – exactly as above. We told them it was a non-negotiable situation, and the company had to start making a profit. They laughed at us and walked out. A few weeks later, we got together with them again. By this time they had put together their list of demands – a six percent a year increase over current wages, better benefits, etc. Again we told them what was required – $15 per hour, etc. Again they laughed at us and walked out. They said it was nothing more than a bargaining ploy.

We then organized an off site meeting with the entire workforce. We put together and presented the facts as laid out above – serious restructuring of wages, work rules, and reductions in workforce numbers would be required, or the plant would be shut and production moved to N.C. We gave them 2 weeks to consider, and then met again offsite for their vote. The union representatives -local/state/national – told them that it was a negotiating ploy, that the factory would never be shut, and that they must never take a backward step. All 2000 employees voted to reject the terms.

We immediately implemented the plan to move to North Carolina. We signed contracts and the plant began to be built. We had no further conversations with the union or the employees. Six months later, a few months before the contract was to expire, the union showed up to negotiate the new contract, and had their same demands.
We told them that the plant was to be closed, per our previous meeting, and that we would continue under the current terms until that time. They laughed at us once more, and said it was a bargaining ploy. They did, however, decide to check out whether the plant was actually being built, and sent a team down to N.C. to inspect and take film. What they found was that the entire shell of the facility was up, and some equipment was actually moved in. This of course panicked them.

The came back the next week to meet with us, and had dropped their demands, and wanted us to sign up to an extension of the current contract. We told them the plant was being closed. Word got out to the membership that the factory was indeed being closed, and the place exploded in a major crisis. The next week they came back again, under enormous pressure from the membership, offering to accept our original terms of $15 per hour, etc. We told them so sorry, the plant is being closed – it is too late.

About 12 months later we fired the first 500 employees. We fired another 500 two months after that, another 500 two months after that, and the final 500 two months after that. We padlocked the gate and walked away.

I revisited the town several years later. Property prices had plummeted. The town center resembled a slum. The entire town had gone to rack and ruin. The decision not to renegotiate terms destroyed the entire town and its surrounds.

These are the lessons I learned from this experience:
1) Unions do not care about the health of the company.
2) Unions do not care about their local membership. Unions believe they must hold the line at every facility less it flow through to their national organization.
3) Unions believe that the jobs lost at one facility will ultimately be picked up at another, as the total work will stay the same. This has proven to be absolutely false.
4) Management is prepared to give away almost anything in order to keep the peace. When it comes unstuck, it will be someone else’s problem.
5) Unions are prepared to lie to the local members in support of their national and state goals.
6) Members will listen and believe almost anything the union says.

Does this sound familiar? These kinds of mistakes are being made everywhere by our “leaders”. People everywhere are being mislead about the consequences of decisions being made. People believe what they are told, and the more outrageous the lie, the more likely they seem to believe it. People hang on to failed causes at their long-term detriment. It is happening today, everywhere.

I was the guy in the black hat. I closed the facility, but the one in North Carolina is thriving. Where are the guys in the black hats that we so desperately need right now to address the critical issues facing the country? Who is going to tell the people the truth before it is too late? Would they even listen if told? I do not see it happening. The scenario above will play itself out on a large scale throughout the country. It will be a painful experience.