Monday, November 24, 2008

Bailouts reward poor performance

Bailouts reward poor performance
Deepak Seth • November 24, 2008
Rochester Democrat and Chronicle

The president and Congress seem to be caught up in the mindset of bailouts being the only mechanism for getting us out of the current economic crisis.

I think it may end up being a case of throwing good money after bad.The federal government should instead figure out a way of rewarding the successful and efficient operators rather than bailing out the inefficient. Obviously the successful operators are doing something right and it is their approach which needs to be propagated throughout the economic system.

The bad practices and processes of the inefficient operators are the contagion which needs to be eliminated to bring the economy back on track.The bailouts allow the same bad practices and processes to get a new lease on life under the very same managements which had created them and allowed them to thrive in the first place. This will only prolong the pain for the entire economy since these companies will continue to sap the system as they continue their market-unfriendly practices.

While the big Wall Street players, banks and insurance companies were driven by insatiable greed to follow unsound practices or to overlook warning signals, several relatively smaller institutions kept their eye on the ball, making sure that they had sufficient collateral before extending loans and have emerged relatively unscathed from the crises.

The government needs to figure out ways of extending the lines of credit for these institutions.These players are more likely to get the monies to deserving borrowers faster and more efficiently. That is what the credit-starved economy needs right now.

A similar approach needs to be followed for the automobile sector. Rather than bailing out the General Motors, Fords and Chryslers, why not reward the Toyotas, Hondas and Nissans that have been consistently more successful in the marketplace? Maybe assist them in acquiring the failing Detroit behemoths and turning them around. Most foreign car companies do a significant part of their manufacturing for the U.S. market in the United States and thus such an approach would better safeguard U.S. jobs.

More damaging is the fundamental organizational and cultural transformation that bailouts may bring about. The shift from "we need to be better focused on consumer needs to be successful" to "we need to have better linkages in Washington to make sure we have a finger in the bailout pie."

It's a shift from "competition" to "patronage" from "consumer" to "feds" from "global competiveness" to "protected islands" from "eliminate waste and improve efficiency" to "who cares, we'll be bailed out in the end." This will be detrimental for the United States in the long run.

Monday, November 3, 2008

Politics has buyer's remorse, too

Politics has buyer's remorse, too
Rochester Democrat & Chronicle, November 3, 2008

As we head to the polling booths on Tuesday, a fear gnawing in many people's mind is: "What if I make the wrong choice?'' The run-up to the presidential election has branded it as a "pivotal,'' "epochal,'' "once in a lifetime'' kind of election in the psyche of the voters.And that makes the weight of the decision even heavier — as if the fate of the universe hangs in balance on each individual vote.

I do not feel the same way.I agree with the point that this election is very important, perhaps more important than any ever.But I have enough faith in American democratic institutions (the executive, the legislative and the judiciary) to know that any changes forthcoming would be within the parameters of what has been enshrined in that shining beacon: the U.S. Constitution.

As I saw both the candidates and their teams in action over the past few months, I felt even more reassured that we are being asked to make a choice between two equally exemplary individuals.Both hold the best interests of the United States first and foremost in their hearts.So whether Obama wins or McCain, we the people have won in either case.

And once the voting is done, the "What, if I make the wrong choice?'' will morph into "Did I make the correct choice?'' That is a question all marketers are aware of. It is what almost any consumer goes through after making any big-ticket purchase.Marketers/psychologists call it "post-purchase dissonance'' or "buyer's remorse.'' Experts say buyer's remorse can be caused or increased by the knowledge that other people will later question the purchase or claim to know better alternatives.It comes down to the "we told you so'' or "you should have known better" moment.Companies deal with buyer's remorse by having return policies that allow consumers to return goods if they are not fully satisfied.

Unfortunately, there is no such thing for election results.However, the lead time between the declaration of results and the oath-taking by the new president (an anachronism from the horse-and-buggy days) provides a release for the remorse and an opportunity to reinforce or rationalize the validity of one's choice.

I would think that any such remorse after the election would be misplaced if every voter makes his or her choice based on the sole criteria of "Who is best for the country?'' without bringing factors such as age, race, sex, appearance or color into play.

If every voter does that, we will end up on Wednesday with the best guy winning.

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