Editorial 02-09 - Humbled by The Great Purge
Humbled by The Great Purge
It has been so very long that since I have felt that there was something to say about the calamitous situation we all find ourselves in today. Everything has changed, our lives, our kids, our business environment, our very futures. At first, almost a year ago, I had felt almost paralyzed in disbelief at the deterioration of the economy, hoping that the downturn was illusory and temporary. Unfortunately, looking back, I failed to cut overhead soon enough or fast enough. it will take years to recoup the capital lost to overhead against the sharp and continuing decline in revenues over the past year. I set about slashing overhead in earnest, and in the process had to say goodbye to many beloved, loyal, and long-tenured employees. I cut everything I could in an effort to get under the shrinking demand. I held on, telling myself that survival of the business was the most important goal, even though I have had to deplete many years of hard-earned savings and retained earnings. Living off of savings and watching my account balances dwindle is indeed frightening, severe, and humbling.
While the sheer pace of decline has decreased, the deterioration of sales revenue has yet to cease. I feel that the bottom is nearing, but obviously will not truely know until it has passed. Some time ago I wrote in this space that we tend have short memories for pain, but I have to say that the anxiety and angst from this experience will probably shape our economic behavior for years to come. This Great Purge of excess, skewed priorities, and values will hopefully give way to a realignment of personal responsibility and a return to familiar values. We have all had to relearn the value of a dollar, even while we watch the destruction of the lives and dreams of millions.
When stock prices soared in the 1990's, I had my money tied up in my business. ("Invest in yourself" was the advice from my elders). I felt that the rewards reaped by the internet millionaires based on non-existant revenues and doubtful potential seemed grossly unfair. I held on to the belief in the ideals of basic economics. I believed that the value added in making a market for computer gear, especially printing equipment, would at least keep up with the economy, but I did feel thatt I had missed out on the stock market explotion. When the dot-com bubble finally burst, I admit some sense of vindication, all the while suffering the decline in business that accompanied that correction.
Then came 9/11 and the world seemed at first turned sideways. Soonafter it seemed that the economy had somehow come through, regaining momentum as soon as the initial shock wore off. But I recall mentioning to my brother that the ramifications of the nine-eleven shock would probably take years to completely manifest. Meanwhile another bubble of false value was forming in false housing values. As it burst, credit froze (and has yet to flow freely again), layoffs continue at a mind-numbing pace, and everyone from consumers to companies stopped, or severely curtailed, their infrastructure expenditures. Millions are now suffering as a result of this collapse. You and I are no different in the pain, the only thing that differs is the degree.
A student of history, I know that the recovery from the Great Depression took many, many years to play out. This episode will also take years to correct. The world indeed has changed. I only hope that it represents a reset of our social value system. The pursuit of money and power are endemic to capitalism, and I as many others have benefited from its rewards. But accepting the upside is the deal we make against the risk of the reality we now face. I fear that we have sown our own demise in the macro, as we and our children bear the great sacrifices and costs that go with them. Even if you are unscathed by the current situation, it is difficult to watch the suffering of others, no matter whether they laid the foundation of their own failure.
Two of my three kids are in University now. My son has just completed his freshman year. He commented how hard his math and science curriculum was. I was reminded of the winnowing out process that first year students experience. It helps clarify and simplify, separating out who is willing to endure, before the intensity of studies moderate in the second year of college. This is a metaphor which has not been lost on me. These tough years are like that. Famously, Warren Buffet commented that when the tide goes out we can see who is naked. In this brutal business environment, it also exposes who your friends are. A smaller group of die-hard, honest, and hardworking entrepreneurs and their priceless employees that survive this deserve to thrive as a recovery emerges.
No one can know when the tide will turn back to growth and recovery. Lets hope it is already upon us.
Hang on tight. The ride isn't over yet.