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Thursday, December 18, 2008

The big chill

I'm reading a rather gruesome crime biography about Joseph Silver, who trolled eastern Europe, Britain, the U.S. and South Africa with a medley of horrendous crimes in the late 19th and early 20th century.

Charles Van Onselen in The Fox and the Flies: The secret life of a grotesque master criminal suggests that Silver may have been Jack the Ripper, who terrorized London in the late 1800s. This is not a book to read if you adhere to the "think only positive thoughts" mind-set, especially when you read that Silver may have found his way to crime and brutality during a 16-year economic depression.

If you think the 30s were bad, go back to the 1880s -- and if you think the world might have been more innocent then, you will find the grinding poverty, prostitution, and evility existed as much then as you read about now -- in fact, this book makes me think we live in a time of unparallelled health and prosperity.

So why read, and describe in this blog, such negative stuff now? We need to put things into perspective and understand that humankind (and economies) do not progress in a straight line up. If you look back in history, you'll see plenty of times of despair, hopelessness, and struggle -- and the seeds of progress and rejuvenation even in these hard times.

We've been fortunate to avoid a really hard and long recession since the early 1990s. Compatriots with similarly greying hair think the road ahead will be extremely rough. Some businesses will sail through the tough times -- they are well capitalized, do not have any debt, and have loads of cash and recurring income streams so they need not worry.

Others (and I think mine fits into this category) will have some really rocky spells; we will sometimes have to make hard decisions, but if we use the common sense and simple business practices developed over the years, we should be able to make it through -- and even thrive.

A third group of businesses will fail. These fit into two categories. The first are businesses started near the latter part of the boom and over-leveraged with debt and high costs (and lacking experience in hard times). The second are businesses which have become complacent, allowed incompetency and vanity to override business sense, and in the process lost their capacity to survive.

An example of the type of business is a building supply company which failed in the early 1990s recession. They advertised on Page 1 of my Ottawa newspaper, month after month, regardless of their cash flow, but payments for their account grew erratic. Then I received a court notice that the company had filed for bankruptcy reorganization. It continued in business following reorganization, and the ads continued to run.

But i sensed something just wasn't quite right -- the person I dealt with just didn't seem to have the competence and ability to run the business; he had been there for many years, it seemed, and the owner didn't want to dismiss him. The advertising payments slowed. I showed up at the office. The owner told me he would be filing for bankruptcy again the next day and I could, if I wish, pick out whatever I wanted from the store to settle the account. (Yes, this is in violation of preference rules, but since more than 15 years have passed, I feel I can safely report it.)

I picked up some power drills, a shop vac, and a solid aluminum ladder, carefully calculating the retail price against the advertising invoices owed (maybe I'm just a little too honest -- I could have taken anything I wanted, and they didn't care.) My car loaded with the stuff of preferential creditor status (or maybe just astute timing), I drove home to muse on the ironies and challenges of business. Today, the drills and other stuff are long gone, but we still use the well-made ladder.

If you are reading this blog, you probably are not in the category of the building supply dealer who allowed incompetent management to continue, draining the business wealth. And I trust none of you are criminals, or thieves, or dishonest players. You are smart, and you have integrity. You know not everyone around you has the same values or intelligence. You have choices, options, and alternatives. But you cannot ignore the world around you and the fact that hard times have happened in the past, and will happen in the future.

Be prepared. You will make it through.

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