I Want Them To Know

I'm not predisposed genetically to be a whiner in bad economic times, and I know that whenever someone who is a Republican complains, the first reaction among many liberals is to hiss back that they don't feel too bad for them. That's not the purpose of this post -- to fuel or inflame everyone else's preconceived conclusions, particularly since several of the people that I know personally were affected by this crisis are liberals themselves, many of whom participated in its making.

Read on...

It is my purpose here, instead, to act as a witness for myself, and to make a statement, hopefully encouraging, to every small business owner in America who is currently suffering because of the debacle in the mortgage and credit markets. I know that the Fed. is on the case and I know that people on Wall Street have suffered. I know that investors in Bear Stearns have lost their shirts, and that the people who work for Bear Stearns have lost their savings in many cases. I've read the stories about some of their people crying in the hallways.

But I want them to know, and everyone else involved in the rocket-science leveraging of risk to know, and to understand: we're hurting too, and in many cases, we're hurting more.

As entrepreneurs starting a new business from scratch, my father and I have tried to do everything prudently. We've minimized our debts. We've scoured the country to purchase equipment at the lowest possible prices so that we weren't exposed to large monthly lease payments. We've liquidated assets that weren't central to our new business to raise capital to keep the lights on. We're actively and aggressively scouting for new business in every way we can -- working old networks, making phone calls, and doing jobs where we effectively donate our labor in order to lower the price for the customer and entice them into bringing us the work.

We're doing everything we can to prevent our ship from sinking, including selling personal items on eBay. We believe in free enterprise and entrepreneurship and capitalism, and we're determined to succeed -- but I want the people at the highest echelons of this crisis, who deal in abstractions and think about the economy from 30,000 feet -- to understand and to realize how serious the compounded results of their malfeasances and mistakes have been. They've been disastrous, and like millions of other "little people" in this country, we are paying the price for their bad judgment and their greed, and their belief in mathematical fairy tales that fly in the face of even the most basic, common sense: don't lend money to people who cannot afford to pay it back, and don't pretend that they will.

In September of last year, things were going swimmingly. My father and I had proven the concept for a complex mailing involving an intricate piece of variable-data printing for a conglomerate of insurance companies who had, until that point, been skeptical of the benefits of our idea. But it was working, and working very well, and our volume was increasing exponentially as a result. We were earning money for our customers and especially for the intermediaries who sold the idea to insurance companies and implemented it. We showed that the job could be done -- on time and on budget -- successfully here in the United States with the right combination of technology and expertise. We felt so confident in our success and the volume projections that we decided to purchase two additional machines to handle the volume.

When the true scope of the mortgage and credit crisis started to become plain to people late in the year, all of that work and effort was scuttled by a 1 minute phone call that came early in the morning, as my father and I were working to set up the equipment we'd just purchased: "Stop working on the [x] job. It's been put on indefinite hold."

Why had it been put on hold? The causes are myriad but the bottom-line logic was inescapable: the job was designed to assist homeowner insurance companies to adjust the value of their policies by engaging the customer directly and asking them to fill out a complex questionnaire. These selfsame companies abruptly realized late last year that in many cases, the people they were mailing to were going to be upside-down, fast, on their home equity. They also realized that their projections for selling new policies had just gone out the window in a down market. You can't sell new homeowner's insurance policies if nobody is buying new homes. The rest is history.

I hate having to write posts that sound like they're made from sour grapes. I believe the American economy will rebound and that we'll survive this downturn and come out even stronger for it. And I don't intend to embark upon a long philosophic dissertation regarding the causes -- Blackhedd is already working on that.

But I want to make something crystal clear to the people who participated in this debacle in a heedless and not-unprecedented lapse of judgment and prudence: the abstractions may sound seductive, and writedowns can be done by typing new numbers into a spreadsheet, and all of it may look like it's just a matter of perspective -- but the pain is real, and the broken dreams are real, and the cynicism those things engender are real. And they undermine people's confidence in the system, sometimes beyond repair.

And for what? So that you could afford a new Patek Philippe this year instead of waiting until next Christmas? So that you could get that last $20,000 commission on that exorbitantly-overpriced real-estate flip and take that vacation to Bora Bora?

So:

Learn from your mistakes, take your medicine, and understand that you have materially and spiritually hurt many, many people. And don't repeat those mistakes. The next time you start feeling the way you felt back in 2005, with all the giddiness, reach down and grab ahold of yourselves, and come back to Earth before it's too late.

End of rant. Get back to work!

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