Kenji Haroutunian, the Show Director for the Outdoor Retailer tradeshow, commented on a prior and incorrect version of this blog post. Kenji says that OR will not use the Energy Solutions Arena for the 2009 Outdoor Retailer show or any future show. I misread an email from an OR account rep.
2009 exhibitors should be pleased that Kenji and the OR staff have been responsive to feedback about Outdoor Retailer. Placing all exhibitors in the same building is an improvement over last year's show, both for exhibitors and retailers, and shows that OR runs its show in good faith and with respect for all attendees.
Saturday, February 28, 2009
Thursday, February 26, 2009
Choose Your Friends, Coworkers, and Friends' Friends Wisely
Science is beginning to learn that human beings are even more social than we'd realized.
Strangers May Cheer You Up, Study Says
"How happy you are may depend on how happy your friends’ friends’ friends are, even if you don’t know them at all. And a cheery next-door neighbor has more effect on your happiness than your spouse’s mood. So says a new study that followed a large group of people for 20 years — happiness is more contagious than previously thought." Click to continue.
Which is why it's so critical for our spouses to have a healthy work environment...
370: Ruining It for the Rest of Us
"A bad apple, at least at work, can spoil the whole barrel. And there's research to prove it. This American Life host Ira Glass talks to Will Felps, a professor at Rotterdam School of Management in the Netherlands, who designed an experiment to see what happens when a bad worker joins a team. Felps divided people into small groups and gave them a task. One member of the group would be an actor, acting either like a jerk, a slacker or a depressive. And within 45 minutes, the rest of the group started behaving like the bad apple. Felps found three types of bad apples:
1. the jerk
2. the slacker
3. the depressive pessimist
Click to continue on to the TAL website, where you can listen to the whole episode.
...and friends who don't smoke...
Study Finds Big Social Factor in Quitting Smoking
"Smokers tend to quit in groups, the study finds, which means smoking cessation programs should work best if they focus on groups rather than individuals. It also means that people may help many more than just themselves by quitting: quitting can have a ripple effect prompting an entire social network to break the habit." Click to continue.
...and friends who are thin...
Find Yourself Packing It On? Blame Friends
"Obesity can spread from person to person, much like a virus, researchers are reporting today. When one person gains weight, close friends tend to gain weight, too... Researchers report...that people were most likely to become obese when a friend became obese. That increased a person’s chances of becoming obese by 57 percent. There was no effect when a neighbor gained or lost weight, however, and family members had less influence than friends. It did not even matter if the friend was hundreds of miles away, the influence remained. And the greatest influence of all was between close mutual friends. There, if one became obese, the other had a 171 percent increased chance of becoming obese, too. The same effect seemed to occur for weight loss, the investigators say." Click to continue.
Strangers May Cheer You Up, Study Says
"How happy you are may depend on how happy your friends’ friends’ friends are, even if you don’t know them at all. And a cheery next-door neighbor has more effect on your happiness than your spouse’s mood. So says a new study that followed a large group of people for 20 years — happiness is more contagious than previously thought." Click to continue.
Which is why it's so critical for our spouses to have a healthy work environment...
370: Ruining It for the Rest of Us
"A bad apple, at least at work, can spoil the whole barrel. And there's research to prove it. This American Life host Ira Glass talks to Will Felps, a professor at Rotterdam School of Management in the Netherlands, who designed an experiment to see what happens when a bad worker joins a team. Felps divided people into small groups and gave them a task. One member of the group would be an actor, acting either like a jerk, a slacker or a depressive. And within 45 minutes, the rest of the group started behaving like the bad apple. Felps found three types of bad apples:
1. the jerk
2. the slacker
3. the depressive pessimist
Click to continue on to the TAL website, where you can listen to the whole episode.
...and friends who don't smoke...
Study Finds Big Social Factor in Quitting Smoking
"Smokers tend to quit in groups, the study finds, which means smoking cessation programs should work best if they focus on groups rather than individuals. It also means that people may help many more than just themselves by quitting: quitting can have a ripple effect prompting an entire social network to break the habit." Click to continue.
...and friends who are thin...
Find Yourself Packing It On? Blame Friends
"Obesity can spread from person to person, much like a virus, researchers are reporting today. When one person gains weight, close friends tend to gain weight, too... Researchers report...that people were most likely to become obese when a friend became obese. That increased a person’s chances of becoming obese by 57 percent. There was no effect when a neighbor gained or lost weight, however, and family members had less influence than friends. It did not even matter if the friend was hundreds of miles away, the influence remained. And the greatest influence of all was between close mutual friends. There, if one became obese, the other had a 171 percent increased chance of becoming obese, too. The same effect seemed to occur for weight loss, the investigators say." Click to continue.
Publishing's "Last-Man-Standing" Strategy
The New York Times reported on itself earlier this month. The publicly-owned company's CEO laid out plans to weather the recession during a conference call:
"As other newspapers cut back on international and national coverage, or cease operations, we believe there will be opportunities for The Times to fill that void,” she said, for both readers and advertisers."
Janet Robinson couldn't be more right. The same scenario is playing out over several two-paper regional metro areas. In Denver, for example, The Denver Post just outlasted The Rocky Mountain News, which today announced that it will publish its last edition tomorrow.
When times are tough, it pays to be bigger, responsibly financed, and better branded. In fact, tough times offer the opportunity to improve all three conditions.
Reality check: Are your expenses in line with your revenues? Are there business functions or products that are not justifying their level of resources? A down economy offers companies a great excuse to bring expenses back into line. Or, as TechCrunch puts it, to preemptively cut costs or eliminate deadweight. Creative destruction destroys many companies, but a little internal destruction can bring your company back down to fighting weight. When the economy comes back, you're already in great shape.
Advertise now! During a recession is the best time to advertise. Ad-supported media like magazines and newspapers are economic bellwethers; ad sales drop soon after retail sales drop. Well financed companies must take advantage of desperate publishers and ad reps to get better placement, better rates, and more runs. Particularly useful is the long-term ad buy. If you signal that you are looking to make a six-month or yearlong advertising commitment, an ad rep will be much more willing to offer a below-rate-card discount. Assuming your competition doesn't undertake the same strategy, your product will be the only one advertising. You can take market share during the recession and invest in your brand while waiting for the economy to rebound. If you are fortunate enough that the economy rebounds before the end of your ad contract, so much the better.
Smell blood? Price like a predator. Is your competition burdened with debt? Do you see any competitors who are relatively weak? A down economy is the best time to put the hurt on your competition. Offer promotional pricing or bundle products in creative ways. Do anything you can to deny revenue to your competitors. Burn cash reserves, knowing that your competitors don't have them.
Any responsibly financed company can undertake the New York Times last-man-standing strategy. Depending on your market, you might be the only one left to serve customers in 2010.
"As other newspapers cut back on international and national coverage, or cease operations, we believe there will be opportunities for The Times to fill that void,” she said, for both readers and advertisers."
Janet Robinson couldn't be more right. The same scenario is playing out over several two-paper regional metro areas. In Denver, for example, The Denver Post just outlasted The Rocky Mountain News, which today announced that it will publish its last edition tomorrow.
When times are tough, it pays to be bigger, responsibly financed, and better branded. In fact, tough times offer the opportunity to improve all three conditions.
Reality check: Are your expenses in line with your revenues? Are there business functions or products that are not justifying their level of resources? A down economy offers companies a great excuse to bring expenses back into line. Or, as TechCrunch puts it, to preemptively cut costs or eliminate deadweight. Creative destruction destroys many companies, but a little internal destruction can bring your company back down to fighting weight. When the economy comes back, you're already in great shape.
Advertise now! During a recession is the best time to advertise. Ad-supported media like magazines and newspapers are economic bellwethers; ad sales drop soon after retail sales drop. Well financed companies must take advantage of desperate publishers and ad reps to get better placement, better rates, and more runs. Particularly useful is the long-term ad buy. If you signal that you are looking to make a six-month or yearlong advertising commitment, an ad rep will be much more willing to offer a below-rate-card discount. Assuming your competition doesn't undertake the same strategy, your product will be the only one advertising. You can take market share during the recession and invest in your brand while waiting for the economy to rebound. If you are fortunate enough that the economy rebounds before the end of your ad contract, so much the better.
Smell blood? Price like a predator. Is your competition burdened with debt? Do you see any competitors who are relatively weak? A down economy is the best time to put the hurt on your competition. Offer promotional pricing or bundle products in creative ways. Do anything you can to deny revenue to your competitors. Burn cash reserves, knowing that your competitors don't have them.
Any responsibly financed company can undertake the New York Times last-man-standing strategy. Depending on your market, you might be the only one left to serve customers in 2010.
Bikerumor.com Wants Your Gossip
I received an excellent promotional email this morning from Tyler Benedict, Editor of Bikerumor.com. The subject was "Media Invitation for your brand".
Aside from the obvious basics; curious subject line (though a little spammy), short email, text broken into lines by subject, there are some interesting dynamics at work in Tyler's invitation.
Check out the full text of the email below.
First, it's fresh and interesting. Tyler actually wants you to send him all your news. He's essentially inviting you to become a partner in his website. Second, it makes the reader feel wanted. Third, the post script about "anonymous spy shots" adds an air of conspiracy, which is perfect for a site called "Bikerumor". There's an implied promise of anonymity for sources as well, though I think Tyler should have gone a step further and promised to protect all sources. Fourth, Tyler hints at the success of his website, which makes the reader curious to check it out and maybe to become a part of the action.
If you'd like to check it out, visit http://www.bikerumor.com/
Sent: Thursday, February 26, 2009 7:01 AM
To: Dave Trendler
Subject: Bikerumor.com: Media Invitation for your brand
Dear Cycling Industry,
Bikerumor.com would like to extend this invitation to use and abuse our site for your promotional pleasure.
How?
Simple...just add editor@bikerumor.com to your media/press list and send us info on all your latest and greatest. If you haven't seen our site, take a minute now and check it out. We publish all your stories with glorious pics in an easy to read, quick to view format that readers love! That's why our viewership is growing about 20% per month!
Is schmoozing the media not your responsibility? That's OK, here's your opportunity to be a hero and forward this email to the person who does. Your brand will get press, and they'll have you to thank.
Is schmoozing the media not your responsibility? That's OK, here's your opportunity to be a hero and forward this email to the person who does. Your brand will get press, and they'll have you to thank.
Thanks in advance for sending us anything you want exposure for.
Best regards,
Tyler Benedict
Editor / Founder, Bikerumor.com
P.S. We LOVE spy shots leaked by anonymous industry types like yourself. So do our readers.
Tuesday, February 24, 2009
Trends in Reading
Turning Page, E-Books Start to Take Hold
"For a decade, consumers mostly ignored electronic book devices, which were often hard to use and offered few popular items to read. But this year, in part because of the popularity of Amazon.com’s wireless Kindle device, the e-book has started to take hold." Click to continue.
Fiction Reading Increases for Adults
"After years of bemoaning the decline of a literary culture in the United States, the National Endowment for the Arts says in a report that it now believes a quarter-century of precipitous decline in fiction reading has reversed." (I can't wait to see how the publishing industry puts a negative spin on this story. Publishing loves nothing more than moaning about the business of making books!) Click to continue.
Check out the summary report, “Reading on the Rise: A New Chapter in American Literacy".
"For a decade, consumers mostly ignored electronic book devices, which were often hard to use and offered few popular items to read. But this year, in part because of the popularity of Amazon.com’s wireless Kindle device, the e-book has started to take hold." Click to continue.
Fiction Reading Increases for Adults
"After years of bemoaning the decline of a literary culture in the United States, the National Endowment for the Arts says in a report that it now believes a quarter-century of precipitous decline in fiction reading has reversed." (I can't wait to see how the publishing industry puts a negative spin on this story. Publishing loves nothing more than moaning about the business of making books!) Click to continue.
Check out the summary report, “Reading on the Rise: A New Chapter in American Literacy".
Friday, February 20, 2009
No, Triathlon Is Not Recession Proof
In December, Running Network and Runner's Web picked up a press release from USA Triathlon, "Is Triathlon Recession Proof?". I can't find this press release on the USA Triathlon website, but Pete Williams's "special to USA Triathlon" poses an interesting question--and a questionable answer.
A few highlights:
Citing the number of races in '07 vs. '08 proves nothing. First, the recession wasn't really underway until mid-2008. Second, it takes months for people to adjust their spending habits. Third, you register and pay for a race months in advance. And you definitely don't skip the race once it's paid for. Fourth, the median household income of a triathlete is over $150K and they report spending around $4K per year on the sport.
It looks like party time's over. According to this early February poll of over 500 triathletes on Slowtwitch.com, 7.1% of triathletes have lost their jobs as a result of this recession, compared to the 7.6% national unemployment rate. Slowtwitch first ran this poll in August, when 4.1% of triathletes had recently lost a job, compared to 4.6% national unemployment. It appears that, at least anecdotally, this recession is affecting everyone and not just lower wage workers.
So how is triathlon likely to adapt to the recession?
A few highlights:
- The press release concludes that, as of December, triathlon is recession proof.
- Williams's bases this conclusion on an "informal survey of race directors across the country"
- The p.r. cites the growth of the number of triathlons from '07 to '08 as evidence.
- It cites this New York Times story which describes triathlon as "a luxury hobby that does not seem to lose its luster even in an economic downturn"
Citing the number of races in '07 vs. '08 proves nothing. First, the recession wasn't really underway until mid-2008. Second, it takes months for people to adjust their spending habits. Third, you register and pay for a race months in advance. And you definitely don't skip the race once it's paid for. Fourth, the median household income of a triathlete is over $150K and they report spending around $4K per year on the sport.
It looks like party time's over. According to this early February poll of over 500 triathletes on Slowtwitch.com, 7.1% of triathletes have lost their jobs as a result of this recession, compared to the 7.6% national unemployment rate. Slowtwitch first ran this poll in August, when 4.1% of triathletes had recently lost a job, compared to 4.6% national unemployment. It appears that, at least anecdotally, this recession is affecting everyone and not just lower wage workers.
So how is triathlon likely to adapt to the recession?
- No one in his right mind will start up a new triathlon race or race series.
- Newer and smaller local races will be cancelled for '09 as they struggle to find sponsors and registrations. The ones who try to weather the storm will slash race registration fees to fill their registrant list. It's already happening. Check it out.
- Municipal races (like the Louisville Legacy, rest in peace) will get cut from the budget as local governments scramble to cover the tax shortfall.
- Mid-sized races will experience mixed impacts. They'll discount race registrations to lure triathletes onto the course. They'll scrap for sponsorship dollars. Some will cancel their '09 events.
- Big races will see little change other than flat or slightly lower registration numbers. The "core enthusiasts" in triathlon will cut their sports-related expenses last. After all, triathlon is a lifestyle.
- Race series like Danskin, Iron Girl, and (upstart) Trek will be protected by their multi-year contracts with national brands but will see a pronounced decline in registration numbers as fewer non-triathletes commit to the expense of a new sport (bike, tri apparel, race registration, nutrition products, gym passes at the local pool, etc.).
- Ironman, with its limited qualifying races and huge waiting lists, will see no change in demand for race registrations, but is likely to lose its sponsorship with, um, Ford Motor Company.
- Triathlon coaching, which is almost an industry within the industry, will implode as less credentialed coaches get dropped by their money-scrimping clients.
- DIY triathlon training resources, like websites, books, and DVDs, will benefit.
- Across the board, tri manufacturers will take a drubbing in 2009. The average triathlete spends nearly $4K on the sport, generally in attempts to buy speed. Triathletes won't leave the sport, but they will be too scared to spend money on new (mostly redundant) gear or they will realize that--just this year--they will still enjoy the sport without spending as much on it as they have historically. My guess is that overpriced nutrition products, bike manufacturers, and apparel makers will lose biggest.
Tuesday, February 17, 2009
Cycling Industry Will Bounce Back in Q2/Q3 of 2009
During the summer of 2008, the bicycle industry was booming. High gas prices and nice weather across the U.S. inspired enthusiasts, fitness riders, and wannabe bicycle commuters to drive less and ride more. In July, QBP reported a surge in sales of 27 inch tires and tubes, a size once popular among bikes that today spend most of their time gathering dust in the garage or basement. People dusted them off, tuned them up, and began commuting by bike. Bike manufacturers adjusted by offering new models designed to get people around town.
As the economic situation worsened last fall, gas prices eased and consumers began snapping their wallets shut. Still, the word on the show floor at Interbike in late September was that the major bicycle manufacturers were scrambling to lock up the materials they needed to fulfill a large volume of 2009 pre-season backorders. Lance Armstrong had just announced that he would race again in 2009, and Lance is very, very good for business. The energy at the show was remarkable; it's rare to see bike shop owners in such a good mood.
Later last fall and early this winter, the general American retail situation has blackened. Holiday sales were down 2.2%, which doesn't sound like much until you consider that holiday sales usually grow and that they make up 25-40% of a retailer's sales for the year. Still, the bicycle industry is quite aware that it has an off season from November through March. Meanwhile, gas prices have fallen below $2 a gallon.
So it was interesting to read in the January 2009 issue of Bicycle Retailer and Industry News that the bike industry is not, in fact, recession proof. Matt Wiebe's article "Wishful Thinking: Bike Sales Up in Recessions" cites industry data gathered by the Gluskin-Townley Group: "Every recession since the ’70s bike boom has cut into industry sales, in some cases substantially—bike sales dropped from 14.1 million units in 1974 to 7.3 million in 1975."
A quick scan of keywords "bike", "industry", and "economy" on bicycleretailer.com shows a conflicted story. One story as far back as June shows that 150 bike shops closed between 2006 and 2007, leaving 4,451. This decline continued a trend: "Between January 2001 and January 2008, the number of specialty bike retailers fell from 6,259 to 4,394, which equals an average attrition of 266 storefronts per year." Gluskin-Townley speculates that 3,800 shops will survive into 2010. Anecdotally, I've been told by industry old-timers that the shop count is falling as the bike industry consolidates. To improve their margins, shops are aligning with frame manufacturers, selling only Trek or Specialized. Consolidation is common in business these days, as it pays to be big. So a decline in the number of shops doesn't necessarily reflect poor sales, just part of a larger business trend.
Yet I'm optimistic that cycling will rebound in mid-2009, at least as an activity. Though gas prices are expected to remain low for 2009, many commuters will stick with it for environmental and budget reasons. People more recently effected by the recession may try to reduce their monthly expenses by selling off cars and dusting off old bikes. Neither of these effects will inspire bike sales, though shops and book publishers may see an uptick for bike maintenence.
The reason cycling will recovery in 2009 is that the race scene will be so compelling. Take a look at the Tour of California, taking place now. Take a look at the roster: all the big names are back, either out of retirement or off doping suspensions. The list of racers who could win the Tour de France is longer and more varied than in years:
This year's Tour is going to be 100% nuts. Excitement is already building as the Tour of California begins to reveal team dynamics and each rider's motivation and fitness. Fans will perk up as the weather warms and they get back on the bike. Those who still have jobs will tire of not spending and, caught up in pre-Tour mania and anticipation of Lance in France, they will return to their cycle of spending habits.
As the economic situation worsened last fall, gas prices eased and consumers began snapping their wallets shut. Still, the word on the show floor at Interbike in late September was that the major bicycle manufacturers were scrambling to lock up the materials they needed to fulfill a large volume of 2009 pre-season backorders. Lance Armstrong had just announced that he would race again in 2009, and Lance is very, very good for business. The energy at the show was remarkable; it's rare to see bike shop owners in such a good mood.
Later last fall and early this winter, the general American retail situation has blackened. Holiday sales were down 2.2%, which doesn't sound like much until you consider that holiday sales usually grow and that they make up 25-40% of a retailer's sales for the year. Still, the bicycle industry is quite aware that it has an off season from November through March. Meanwhile, gas prices have fallen below $2 a gallon.
So it was interesting to read in the January 2009 issue of Bicycle Retailer and Industry News that the bike industry is not, in fact, recession proof. Matt Wiebe's article "Wishful Thinking: Bike Sales Up in Recessions" cites industry data gathered by the Gluskin-Townley Group: "Every recession since the ’70s bike boom has cut into industry sales, in some cases substantially—bike sales dropped from 14.1 million units in 1974 to 7.3 million in 1975."
A quick scan of keywords "bike", "industry", and "economy" on bicycleretailer.com shows a conflicted story. One story as far back as June shows that 150 bike shops closed between 2006 and 2007, leaving 4,451. This decline continued a trend: "Between January 2001 and January 2008, the number of specialty bike retailers fell from 6,259 to 4,394, which equals an average attrition of 266 storefronts per year." Gluskin-Townley speculates that 3,800 shops will survive into 2010. Anecdotally, I've been told by industry old-timers that the shop count is falling as the bike industry consolidates. To improve their margins, shops are aligning with frame manufacturers, selling only Trek or Specialized. Consolidation is common in business these days, as it pays to be big. So a decline in the number of shops doesn't necessarily reflect poor sales, just part of a larger business trend.
Yet I'm optimistic that cycling will rebound in mid-2009, at least as an activity. Though gas prices are expected to remain low for 2009, many commuters will stick with it for environmental and budget reasons. People more recently effected by the recession may try to reduce their monthly expenses by selling off cars and dusting off old bikes. Neither of these effects will inspire bike sales, though shops and book publishers may see an uptick for bike maintenence.
The reason cycling will recovery in 2009 is that the race scene will be so compelling. Take a look at the Tour of California, taking place now. Take a look at the roster: all the big names are back, either out of retirement or off doping suspensions. The list of racers who could win the Tour de France is longer and more varied than in years:
- Lance Armstrong (out of retirement)
- Levi Leipheimer
- Ivan Basso (off doping suspension)
- Floyd Landis (off doping suspension)
- Alberto Contador
- Christian Vande Velde
- Tom Danielson
- Oscar Friere
- Cyril Dessel
- Carlos Sastre
- Tyler Hamilton
- Alejandro Valverde (not racing ToCA)
This year's Tour is going to be 100% nuts. Excitement is already building as the Tour of California begins to reveal team dynamics and each rider's motivation and fitness. Fans will perk up as the weather warms and they get back on the bike. Those who still have jobs will tire of not spending and, caught up in pre-Tour mania and anticipation of Lance in France, they will return to their cycle of spending habits.
Sunday, February 15, 2009
It's Good to Be Big (Why the Future of Business is Big)
It pays to be big.
The automotive and banking industry bailouts reveal just how much it pays to be huge.
America's car-centric culture and blue collar mythology are leading union-paid Democrats to hold the auto industry's hand through these tough times. Congress has argued that because the auto industry employs so many, its existence has become a public good. This is a strange argument to make; rather than prioritizing a resource or a product as a public good, Congress has decided that the producer is the public good. There is no better example of a distortion of the free market than this. Congress is preventing the free market from one of its most important functions: creative destruction of less efficient producers. Congress is willing to subsidize the consequences of decades of industry-wide incompetence to prevent the short-term pain of job losses.
And why hasn't Congress taken this perfect storm of opportunity to force Detroit into the environmental reforms Democrats have wanted for decades (and campaigned on for two years)? My conclusion is that the Democratic party lacks the killer instinct and resolve to make tough decisions and is willing to forego long-wanted, long-term gains to avoid possible short-term damage to its relationship with Detroit's labor unions. How principled.
Meanwhile, vote-starved and finance-loving Republicans have stowed the tough love rhetoric and indignance about our welfare state to give (and lose track of) huge sums of money to the very people who just got finished losing huge sums of money. They argue that the finance industry is the "motor oil of a free market, capitalist economy" and without it, we'll fry the engine. Even in finance, creative destruction is an integral part of a functioning market. At least Congress is arguing in this case that the product of an industry is a public good.
The free market is no longer free if the government bails it out. Bailouts are precisely the kind of distortion that make the market less efficient and less able to make corrections. It seems that it pays to be a big company.
Except when it doesn't.
How do you take your peanut butter? With rodents, feces, and feathers? Today's lightning-fast info distribution means that the big guys are more susceptible to the whim of the public. Take, for example, the recent salmonella outbreak caused by Peanut Corp. of America. PCA handles less than 3% of the American peanut supply, yet jarred peanut butter sales dropped 22% in January. PCA, undoubtedly as a preemptive defense against litigation, has declared Chapter 7 bankruptcy. Consumer advocates are howling at PCA's attempt to get out of jail free, angry in part because of new allegations from the FDA that PCA knowingly shipped salmonella-tainted foods. The FBI and FDA have opened a criminal case.
PCA was a small operator in a big industry, but the entire industry will suffer, from peanut farmers to food manufacturers to retailers, as a result of one small company's disgusting actions.
The automotive and banking industry bailouts reveal just how much it pays to be huge.
America's car-centric culture and blue collar mythology are leading union-paid Democrats to hold the auto industry's hand through these tough times. Congress has argued that because the auto industry employs so many, its existence has become a public good. This is a strange argument to make; rather than prioritizing a resource or a product as a public good, Congress has decided that the producer is the public good. There is no better example of a distortion of the free market than this. Congress is preventing the free market from one of its most important functions: creative destruction of less efficient producers. Congress is willing to subsidize the consequences of decades of industry-wide incompetence to prevent the short-term pain of job losses.
And why hasn't Congress taken this perfect storm of opportunity to force Detroit into the environmental reforms Democrats have wanted for decades (and campaigned on for two years)? My conclusion is that the Democratic party lacks the killer instinct and resolve to make tough decisions and is willing to forego long-wanted, long-term gains to avoid possible short-term damage to its relationship with Detroit's labor unions. How principled.
Meanwhile, vote-starved and finance-loving Republicans have stowed the tough love rhetoric and indignance about our welfare state to give (and lose track of) huge sums of money to the very people who just got finished losing huge sums of money. They argue that the finance industry is the "motor oil of a free market, capitalist economy" and without it, we'll fry the engine. Even in finance, creative destruction is an integral part of a functioning market. At least Congress is arguing in this case that the product of an industry is a public good.
The free market is no longer free if the government bails it out. Bailouts are precisely the kind of distortion that make the market less efficient and less able to make corrections. It seems that it pays to be a big company.
Except when it doesn't.
How do you take your peanut butter? With rodents, feces, and feathers? Today's lightning-fast info distribution means that the big guys are more susceptible to the whim of the public. Take, for example, the recent salmonella outbreak caused by Peanut Corp. of America. PCA handles less than 3% of the American peanut supply, yet jarred peanut butter sales dropped 22% in January. PCA, undoubtedly as a preemptive defense against litigation, has declared Chapter 7 bankruptcy. Consumer advocates are howling at PCA's attempt to get out of jail free, angry in part because of new allegations from the FDA that PCA knowingly shipped salmonella-tainted foods. The FBI and FDA have opened a criminal case.
PCA was a small operator in a big industry, but the entire industry will suffer, from peanut farmers to food manufacturers to retailers, as a result of one small company's disgusting actions.
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