Year-end broadcast commentaries suggest that the present economic contraction is being regarded as the End of an Era. That period is said to have been characterized by increasingly frenzied consumer spending fueled by imprudent extension of credit by lenders, and overreliance on it by borrowers. On this analysis, the current crisis arose when, at last, the bills came due.
This may be a helpful sketch, although many people certainly did not indulge in that borrowing-and-consumption orgy. In fact, we don’t know anyone who did. We think it might be more useful to shift our focus from what all the parties were doing, to the context in which they were doing it.
Briefly, we believe that a major contributor to the increasing discontent over the past decade and a half, and to the subsequent collapse, was obsessive oversimplifying and contempt for information. We are continually told that the world is awash in information, that there is more of it flying around than we can possibly comprehend, and so on and on. However, we think there has been far too little attention paid to understanding the stuff, packaging it and getting it to the people who need it.
If this is the case, it might be argued that there are several likely causes. First, those wishing to get on the fast track to success have been encouraged to be visionary, to look at the “big picture.” The idea is not to get bogged down in details, but rather, to leave those to the bean-counters and the geeks. Second, there is a prevailing view that people do not want detailed information. We are said to be “postliterate,” to make purchase decisions on the basis of visceral feelings, and to prefer trial and error to boring written instructions. Other contributors seem to be the fear that providing too much information somehow increases vulnerability to competition, or to litigation, or both. Finally – and this may be oversubtle – information usually deals with something that has happened already: those who really are hip never look back.
It need not be pointed out that, whatever the reasons for it, this doctrine has been very convenient for people with varied interests, from software publishers wishing to shed the costs of producing and updating documentation, to a diverse array of opportunists wishing to conduct swindles.
One way to look at the Ends of Eras is that they occur when the general perception, the world-outlook, that inspired the era has gone as far as it can go, and further possibilities are exhausted. After this point has been reached, attempting to go on operating under the same doctrine, within the same model, produces results that are sterile and unsatisfactory at best.
Perhaps the vending, amusement and music industry is fortunate in having recognized, as this decade wore on, that its traditional model no longer is able to deal with the world as it has become. This may have given alert operators a head start on taking corrective action. Other industries, many with much higher profiles, have just received the wake-up call. And, fortunately, some prominent figures have begun to raise questions about the conventional wisdom of the past two decades.
The mindset underlying that model was one of relentless simplification, focused on the short term. It strongly encouraged strategies that would yield the highest return with the least risk over the next reporting period. It regarded anyone in an organization who was not making a quantifiable contribution to that near-term objective as redundant. And it ignored the ongoing structural effects of these policies.
As American business, in general, acted on those beliefs year after year, we began increasingly to think of the steamship voyage described in Around the World in 80 Days. Fuel runs out, and the mariners begin ripping up the deck to stoke the firebox. This sort of thing can yield an impressive cost-benefit ratio for awhile, but it is unsustainable.
During the novel combination of economic stagnation with price inflation characteristic of the 1970s, someone in high office was asked why the government’s efforts to solve the problem through Keynesian countercyclical policies were not working. He replied by recalling that the late John Maynard Keynes had been asked about the long-run consequences of those measures when he initially proposed them, during the Great Depression. “In the long run, we are all dead,” that celebrated economist had quipped, dismissively.
“Well, it is now the long run,” the government expert explained, “and Lord Keynes is dead. But we’re not!”
The first innovator who took over a company, fired all the secretaries and most of the middle managers, and got rid of all the product lines that lacked mass mainstream appeal in the interests of supply-chain efficiency got striking results – at the cost of obliterating the organization’s collective memory – and was hailed as an innovator. But it could not work forever, and the wall now has been hit.
We think the coming recovery will favor those who recreate the older method of building a business: developing a loyal long-term staff that identifies groups of potential customers, develops an understanding of their needs and concerns, esteems their collective identity and strives to build cordial relations for the incremental benefit of all the parties. This has succeeded before, and it can succeed again.
The participants in the recovery also will perceive that a company – and an industry – develops a distinctive value and corporate personality over time. Those who work in it have some obligations as stewards. As Kipling reminded his readers during a bleak moment in British history,
...in all time of our distress,
As in our triumph too,
The game is more than the player of the game
And the ship is more than the crew!
Central to such a recovery must be a revived regard for good information, and a renewed recognition of the value of communicating it. This was common knowledge well into the 1980s, but the practice of communicating has deteriorated sadly since then.
There exists a generation of business leaders for whom only information whose effect can be assigned a dollar value is worth disseminating. All publicity reduces itself to financial public relations. If the expense of preparing a press release cannot be translated into higher share value, they ask, what is the point?
This mindset does not exclude the possibility that good press information can attract the interest of prospective customers, demonstrate functionality to them and show them value. It does not reject out of hand the idea that exhibiting at a trade show, helping underwrite a state association fundraising event, or advertising in a trade magazine can build sales volume, thereby increasing profits and so, eventually, increasing the value of the enterprise. But these strategies defy precise quantification, and require work and thought. Simpler alternatives seemed to be available.
The classical view always has been that slow dimes are better than fast nickels. Over time, though, people become bored. They desire novelty, and they grow contemptuous of the conventional wisdom. Sometimes, to be sure, a movement of this sort produces the Renaissance, or thermodynamics. But, in the vast majority of cases, it simply results in unpleasant surprises, sooner or later.
The vending industry has been traveling through a dark valley for most of this decade. We think most of the survivors now have a good idea of what they need to do next. We’re sure that they understand that profitability is essential to recovery, and that profitability cannot be attained without sales. We are not so sure about the financial services or automotive industries, but we do believe that, at least, the operators get it.