Day 14: A Healthy Dose of Natural Selection

I can’t believe it’s almost a week since I last posted. Work has taken a huge share of my time which as most typical Asians would say, “More work means more business – so it’s a good thing”.

Actually looking at the current state of affairs, it IS a good thing. The United States is dealing with escalating rate of unemployment while a number of Asian and European nations are currently grappling with union protests from road truckers and other transportation-based bodies. My cubicle doesn’t seem that bad after all…

I don’t mean to sound rude or heartless, but as we all deal with the raising issues of inflation, a couple of questions seem to linger inside my head. What if inflation isn’t that bad after all? What if we look beyond a recession and deal with it as a natural cycle of worldwide operations? Sometimes I wonder if inflation is as bad as it sounds or is it more of a political tool to strike fear into the very hearts of society in order to gain a constant support for the ruling party? After all, fear is the single most effective tool against the masses. We’ve seen this happened with Hitler, Pol Pot as well as traditional China. Strike fear into the people and you can turn each and everyone of these people into a sheep and herd them away. Those who are slow or defiant you can teach them a lesson by slaying them and then put them in the oven. Lamb chops anyone?

Oh. Don’t forget the wool by the way.

Anyway, enough of the drama already. We’ve whined and we’ve moaned about how painful the oil increase is for us and the rest of the world. Let’s look at this from a retrospective point of view. Let’s imagine we’re all happy human beings unfazed by any bad breaks.

Let’s imagine that inflation isn’t that bad after all. Look at it from a natural selection point of view. Every few years when we’re hit by a recession, be it due to a financial speculation, war or like today – an oil crisis, many things will change. Businesses will change, lifestyles and consumer habits. As a whole, these changes do seem to sway more towards the positive side.

Why?

Businesses will need to cut jobs, trim expenditures and hedge their funds. Better human resource management, budget management and financial management? Imagine if businesses were to continue to expand and expand without a horizon or goal in place, then there would be no time to stop and ponder the effectiveness and performance of the said business. Corporations and conglomerates will be too fat and sluggish due to too many underperformers sitting in the office drawing pay check after pay check without a need to re-evaluate their growth. Call it the natural 80/20 rule, Jack Welch imposes it on a more consistent basis but not all CEOs are Jacks and not all companies are disciplined in evaluating employee performance. The recessionary period only makes sure that we are all on our toes and thus, giving us the opportunity to trim the fat and build the muscles. We all need a diet every now and then anyway.

How about budget management? How big should a company be before the annihilation of its competition while having an impossible barrier to entry? A recession essentially gives others the opportunity to step into the market. It possibly lowers down growth so that smaller businesses can have the opportunity to catch up and ultimately make the market more competitive. Having a Microsoft dominate the desktop is bad enough but can you imagine if Microsoft is also in retail, transportation and finance? Drinking Coke without a choice of Pepsi, Nike without Reebok or Adidas. Life would be boring. Essentially what I mean to say is that inflation and recession isn’t exactly a bad thing. It gives companies ample time to relook at finances and how to better manage cash flow and its budget. Those who are not disciplined will wither away while making room for new and better companies to take its place. It also forces pro-active companies to look at how to plan and keep some for a rainy day without breaking the bank with overdrafts and loans.

One thing that also emerges during time of recession is innovation. Each recession is triggered by very unique factors. These factors essentially provide a glimpse into the future. Take for example the 1997 Financial Crisis. Without that happening, can you imagine how loose the Asian economies, monetary policies and currency controls will be? We were essentially at a point whereby we were so comfortable with the current system that we refuse to look at how we can manage our risks better. Basically we had to re-invent the way we handle world speculation and a free market. It basically says, “We need better financial governance and management for a new economy” with Worldcom and Enron ultimately relegated into textbook examples of how financial management can bring down a titan of its time – even a country.

Of course it isn’t possible to prepare ourselves for all the risks in the world but what happened in 1997 was a wake-up call for these economies and it basically prepared them for greater growth with more solid foundations to compete globally.

So there you have it! Not sure if this makes sense but think about it and let me hear your thoughts.

Have a good one.