Pendulum Swings Against Business, Banks, and Bonuses

Two Very Important Sentences:

Fred Wilson of AVC posted my favorite line from the president's press conference today; and the whole post -- brilliant blogging, in my opinion -- was this simple quote:

At the same time, the rest of us can’t afford to demonize every investor or entrepreneur who seeks to make a profit. That drive is what has always fueled our prosperity, and it is what will ultimately get these banks lending and our economy moving once more.  

Good point. Thanks Fred, and thanks Mr. President. Somebody should say it.

A Catch 22 on Banks

Talk about on again -- off again -- on again:

1. They wrote all those banking laws back in the first great depression when banks were caught speculating with depositors' money. So banks weren't allowed to invest in, say, a good business plan. Instead, they had to have collateral. The world wanted banks to play it safe.
2. Then in the great boom days of the last 10-15 years, banks were set free and they started using "yoopeee" as their philosophy of loan management. And we loved it. We said "Yoopee" too. That is, until they crashed and burned. And got bailed out with our money.
3. Now there's a credit crunch and we want the banks to lend again. So do I. But do we want them to make bad loans, or risky loans? Isn't that what got us into this mess?

And How Did Bonus Become a Bad Word?

OK I know the answer; anybody who hasn't been living in a cave knows how bonuses got a bad name: excess and greed in large business. Bailouts and bankruptcies and lavish bonuses don't go together. Thank you, big business, thank you, big banks, and, specifically, AIG; but they're not alone.

But what about the rest of us, in small business, where a bonus is a reward for a job well done? Where people get an extra month or two of salary if -- and only if -- the company makes a profit? Bonus isn't a bad word, or shouldn't be. No profits, then no bonus.

This isn't lavish excess. This is sharing profits, working and thinking as a team. And it's a good thing, not a bad thing.

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Comments

[BluestateGuyInTX]

Sorry, but I think we need this pendulum swing. You act as if money were the only way to reward people. Think outside the money box. How about a week off? A sabbatical? Support to pursue a pet project? Recognition by one's peers? Nice Christmas parties (where have they gone over the years?). Let those Silicon Valley creativity juices flow. The world is not just about a bigger paycheck and I think the notion that it is has hurt this country a lot.

[eichler1]

"At the same time, the rest of us can’t afford to demonize every investor or entrepreneur who seeks to make a profit. That drive is what has always fueled our prosperity..."

Whose prosperity? What modicum of social compact the USA ever had was slaughtered in the Reagan '80s and remains dead today, as Geithner well demonstrates. Secondly, for there to be a chance that prosperity will be shared by the greater pubic, business endeavors have to create something of actual value, not credit default swaps or other esoteric shell games for Wall Street financial charlatans.

Without business endeavors that create value and a social compact under which "entrepreneurs" at least feel compelled (or are required by law) to share the wealth created, the notion of "our prosperity" will be limited to very few and will serve mainly as a symbol of their class warfare against the rest of us.