Darwin, Free Market Capitalism, Pandemics: How Far The Bailouts? – Part 2 of 2

Words: 2,131

Today’s Pontificate –   When you look at the above photo… the owner is doing a pandemically-inspired going out of business sale, yet he still needs customers to even do that much.  With some businesses just closing up is only part of the problem.  The other part is what to do with inventory and furnishings so you don’t have to pay for storage space.


 

I’m taking you, reader, on a bit of a trip into past history when I had my own retail store… and had to close it up.  It was much like a Radio Shack, although we also had installation bays for installing after-market car electronics (car stereo, cassette, CB radios, etc.).  Hot items back in 1976.  I employed two full-time and four part-time people at the height of my business operation.. which lasted four years.

Why I Went Out Of Business

As they say with any business.. it usually comes down to location, location, and location.  Now, bear with me as I have to provide some background on the kind of economic region in which my store was located so you can better understand why I went out of business.  Early in 1976 I left the military, bought a carpet cleaning machine, moved to Rockford, Illinois, and started my own one-man business.  I was 26 years old at the time, married, no kids.  Rockford, Illinois’ second largest city (to Chicago), is located about 20 miles from the Wisconsin border.  Although Rockford is in a semi-rural area of northern Illinois, it was/is dominated by medium industry, from electronics to tooling to fabrication… some of it for the defense industry.  But primarily it traditionally has supported the auto industry in the region.  Twenty miles to the east was Belvedere, Illinois, home of a Chrysler Assembly Plant… and 40 miles to the north was the GM assembly plant in Janesville, Wisconsin.  Rather in the middle of that geography was the sleepy town of Beloit, Wisconsin, right smack on the state line.  When I shed carpet cleaning for retailing (a whole other story) that’s where I opened my store… on the main drag on which all the local/regional truck traffic passed, which was my primary customer demographic.

To say in a nutshell my business had to fold as a result of the two Arab-spawned energy crisis of the 1970’s is accurate to a point.  Essentially I was forced to close when my primary customer base, people employed either by the local auto industry employers or other business entities that supported the industry, evaporated.  Why did this happen?  Glad you asked.

The first energy crisis occurred in 1973 when the Arab OPEC nations played with supply and price.  I was still in the military and unmarried at the time.  I would travel on the weekends from my military base, Grissom AFB (now Grissom Air Reserve Base), near Kokomo, Indiana.. to my home in Chicago.  I would leave Fridays after my duty shift, returning to base late Sunday night.  When the fuel shortage took hold it got very nasty.  I would have to plan my return to base as early as Sunday morning.  My strategy was determining which suburb I would go in my search for a fill up to head back to the base by midnight.  It took hours looking for gas.. passing closed gas stations along the way.  One strategy was finding a big fuel truck traveling on the road.. and simply following that truck to it’s presumed gas station destination.  I was not the only one doing that.  Many times there was quite the convoy following a tanker.

At that time in 1973 I still had another 18 months left in my enlistment so I was not overly concerned with a future life outside the military.. and there was even interest in re-enlisting for another term.  As the months passed the energy crisis eased up a bit.. at least at the pumps.  But there was an immense trickle down effect when gas became scarce that seemed to include all facets of daily living.   Rather than detailing all the in-between history.. suffice to say that in late 1975 I managed a start-up retail store selling CB radio and car stereo.. both going bonkers in fad sales across the country.  A buddy wanting a piece of the action hired me as his manager.  After about three months he realized there was a conflict in him owning a store and his regular job.. so I jumped at buying him out with a money loan from my mother in late 1975.  For nearly four years I did pretty good building up the business.  In the meantime out in the real world, there was a growing shift in the public’s view of the past energy crisis… and had concerns about.. what if this happens again.  There was a growing interest in the public willing to abandon big gas guzzler cars, opting for the smaller foreign imports, largely from Japan.

As foreign car sales increased over the years, the Big Three American auto makers began to wake up.  They assumed the fad demand for smaller foreign vehicles would fade over time because big American cars were forever.  To add to that, even if Detroit wanted to shift gears to make smaller vehicles, it would be an immense amount of bucks to put into re-tooling.  Over the next four years domestic car sales declined drastically and not entirely because of the gas shortage alone.  Foreign cars had a good quality rating overall when compared with domestic cars; domestic cars were “crap” by comparison.  Then came the second energy crisis in 1979.  That was the coup de grace  for big American guzzler cars.  GM, Chrysler… all went into large layoffs… and that meant in my area, the Janesville GM plant and the Belvedere Chrysler plant.  The trickle went everywhere around the Stateline area.  Auto suppliers, car dealerships, all laying off workers.  No one was buying much of anything, wisely choosing to hold their money and riding out unemployment.  Congress considered the ramifications of having umpteen thousand workers cast into the welfare and unemployment compensation rolls all at once nationwide.  By 1980 I was out of business.

It was then that Chrysler CEO Lee Iacoca (creator of the Mustang) came to the forefront.  Besides the pressures of a gas shortage changing the public’s buying patterns, Chrysler for years had suffered from lousy management and crap quality control.  When Iacoca took over he developed a plan for a corporate re-structure, and re-tooling, and even had designs ready for production for three compact vehicles he said Americans would love… the Dodge Omni and Plymouth Horizon, followed by the Plymouth Aries and Reliant.  As fate would have it, those models were to be made at the Belvedere plant.  He appealed to the federal government for what amounted to a financial bailout to keep thousands employed to the tune of 1.5 billion… and meet the public’s need for cheap and fuel efficient cars.  The rest is history.  While many didn’t like the Chrysler bailout at all and didn’t expect to see any money paid back… Iacoca amazed the world.  Sales of the “K” cars skyrocketed, adding to the success of the huge ad campaign with Iacoca himself making the challenge on TV commercials… looking straight into the camera he said.. “If you can find a better car, buy it.”

Watching this Youtube gave me shivers.  You don’t see this anymore.  The man was literally a genius with his message; he was frank, appealed to the patriotism within all of us, and you believed in his take-charge attitude.  He wasn’t BS’ing you.  He set the trend for other CEO’s to be in their own commercials… most not as effective.  At the time there was a movement to push him to run for president.  Sadly, he passed away in 2019.

Lee and the pay off check to the Fed.

The man paid off the loan years ahead of schedule.  Quite a success story.  But to my greater point of this post… at the time I was thinking.. why does Chrysler get a bailout and I don’t?  Well, I harbored no resentment and pretty much laughed it off.  I was already focusing on my next endeavors in life.  But the answer to my question was a bit obvious.  I didn’t have thousands of employees on the verge of getting laid off and dependent on unemployment compensation.

It’s an amazing story and I encourage the reader to check out the two links below for the rest of the story.

Chrysler Bailout.     1970’s Energy Crisis.

To Summarize…

The entire point here is to present the concept that in a free market businesses do fail and for any number of reasons.  In my case I could easily say that at least the 1979 crisis put me out of business.  But then again, why didn’t I take into consideration the effects that occurred in 1973 as that’s when the economic handwriting was on the wall.  Maybe I should not have started the business… or purchased it from the owner.  Maybe when the local economy shifted I was under-funded to ride out the storm.  There were all kinds of excuses for me going under beyond just the “Arab oil crisis”.  Every business owner describing their business failure can say, “Everything was going along just fine until  [fill in the blank].”.  The whole idea is that I could not survive… and the market selected me to fail.  It’s akin to Ian Malcolm (Jeff Goldblum) saying that nature selected the dinosaurs for extinction because they couldn’t survive on their own following that meteor.

So where does this place us when discussing bailouts for pandemically affected businesses?  Admittedly this is an event no one could have predicted.. but nonetheless it IS an event.  Let’s take restaurants and bars as an example given they are making the most media “noise”.  What happens if they all are allowed to close?  Well, the pandemic is not going to last forever.  When the vaccine allows us to leave our homes and we again crawl out into the sun… what is likely going to happen with a population wanting what once was.. picking up their lives from where they left off… and wanting to return to their old food eatery haunts?  Mark my words… like nature is relentless, so is the human capacity toward grasping at opportunity.  Someone will open another restaurant.. another bar… and it will all make a comeback… like a forest floor recovering after a fire.  Perhaps your focus should be… you being that “someone”.  I am not sold on the concept of giving money to allow a business to stay open when the entire problem is loss of customers.  If it’s all about retaining dedicated employees then give the public more money directly.. not through their employer who is about to go under.  As I mentioned earlier… giving entertainment businesses money for anti-covid buildouts of plexi-glass partitioning, air filtering, and furniture placement will not guarantee customers will show up at the door.  The “good” part to all this loss of business… even your competitors are going through what you are going through.  No one going through this is having any sort of home court advantage.  Sometimes a strategic retreat can be a good thing.

What the government should consider is through the SBA guaranteed loan program, is underwrite guaranteed bank loans to pre-covid existing business owners when the pandemic storm clouds disappear, to allow them to re-build based on their post-pandemic track record of earnings.  No one is better to restore a faltering industry than the original owners.  In the meantime… if they can’t stay open, then close.  Save this business stimulus money for now.  Survive on the personal parachutes of unemployment and subsidies like the rest of us.  Make your comeback later.  Let’s try and end this pandemic and not make a lot of “loss of freedoms” static just to stay open.. with little or no paying customers to keep you open anyway.  Think of it this way… now’s the time you could be using to make your next business plan, and go for the pie-in-the-sky financing this time to broaden your come-back dream.  Create your next opportunity.

Starting a business doesn’t require a lot of thought, but to make your business a success it does require a mindset and stamina and determination in adhering to basic business principles.  The REASONS for starting a business are as vast and diverse as humanity itself… but it is the most important element to understand within yourself.  As a business owner you have to solidly know your own personal limitations.  Where you fall short, then find people to fill those gaps.  The vast majority of business failures have little to do with pandemics, outside political events, gas shortages, or those “idiots” in Congress passing “bad” laws.  It’s the inability to manage properly.

PS:  If you missed PART 1, go back and check it out HERE.

Now what?

6 Comments

  1. beetleypete

    I had a similar short spell in retail. In 1976, my mother and I bought the lease on an Off Licence. (Liquor store to you) It was a small shop on a busy corner, with no nearby competiton. We lived above the place in the three floors of accommodation that came with it. Under the rules for selling alcohol in the UK at the time, we had fixed opening hours. We had to open from 11 am to 2pm every day, then close until 5 pm, remaining open until 11pm. All the alcohol sold had to be bought from the brewery that leased the shop to us, under contract. But things like cigarettes, candy, and snacks could be bought locally, from wholesalers.
    The summer of 1976 was the hottest on record in Britain, lasting from late May until the end of September. As a result, people bought cold drinks like Coke and beers in unprecedented numbers, and shortages soon happened. We lost the chance of making a really big profit in our first year, because of an unexpected heatwave.
    By the end of 1977, the law was changed to allow supermarkets to sell alcohol. That was a very big nail in the coffin of small businesses like ours. The huge chains undercut us on every single item, and soon our only business was after 6pm, when most of them closed. I had to get a full-time job, and work in the shop when I got home from work. My mum hung on for another year, employing one part-time woman to help her when I was at work. But by the end of 1978, she was in trouble financially. In late 1979, she cut her losses, left the business and got a job. By that time I was married, and about to become an EMT. Because we never owned the building, mum came out with nothing, except some change from selling the coolers and fittings.
    Supermarkets 1, Johnson family 0.
    Best wishes, Pete.

    Reply
    • Doug

      Funny when you get to be our age, Pete, we look back on all the woulda-shoulda-coulda’s in life and the struggles that have since become just casual memories. Your family surely understands the pains of business ownership and all those threats to existence. Then just when you think you have life all figured out.. a pandemic. Thanks for sharing that.

      Reply
    • Doug

      Oh yes… but then that’s a variant of Chaos Theory… or rather Chaos is a variant of Adam Smith’s theory… the proverbial butterfly flapping its wings can cause a tornado. The complex transition of one act impacting multiple levels down the line.

      Reply
  2. Peter Harris

    In a world of reductionist thinking, it doesn’t enlighten me.

    Chaos theory little-understood, but it’s all around us.

    Charles Darwin completely wrong… false premise, then builds on the false premise.

    Epigenetics… Jean-Baptiste Lamarck.

    Reply
    • Doug

      Horizontal transposon transfer.

      Reply

Leave a Reply

About My Icon

In The Blogging World, I’m A Knight Without Armor In A Changing American Landscape

You'll Want to Subscribe to This Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.
-

Witty Quotes To Make Me Appear To Be A Deep Thinker

Recent Posts

Awards & Recognition

Affiliations

%d bloggers like this: