Tuesday, September 21, 2004

Wisdom from a message board, of all places...

Among old line Southern cafeterias, Luby's has been an undisputed example of excellence. That segment of the food business has been savaged by the advent of food courts, buffets and steak houses that offer all-you-can-eat food bars. Those of us who worked for profits the old fashioned way, seeking to squeeze a nickle or eight cents out of a dollar have a good idea how hard it is to report a real profit. I'm sure that citing a Yahoo message board post is considered low-brow among bloggers, but I don't care. This writer from the Yahoo message board is a clear thinker, whoever he or she is, and the argument is excellent. The opening reference is to the current trend to worshiping profits above all other Gods (see previous post).

'the stock price is the ONLY indicator (that matters) of how the actions of management are judged.'

That is all too true. As Hootsbuddie alluded, this relatively recent shift in priorities has left some damage in its wake. Companies once gave similar priority to shareholders, customers, and employees, and there was a balance where all worked together to build this great economy. Now that we have shifted to working only for the stockholder, employees become a commodity to be used and tossed out as best benefits shareholders.

One problem is that shareholder benefits from this are short-term. As good employees leave, the company loses more ability and knowledge to run the business profitably. Not only that, but we are now discovering the seemingly obvious premise that people who are not employed do not have the purchasing power to sustain businesses.

In the long run, as more industries have adopted this 'shareholders above all' mentality, we have seen workers displaced to illegal or foreign competition. This is great as long as the economy is vibrant enough to absorb the displaced workers into other areas. The problem seems to be that the economy just isn't that big anymore. We are no longer immune to the wage pressures of people in China, India, or anywhere else.

You have to wonder where shareholders are going to get any kind of return when all their paying customers can no longer afford to buy anything because they were displaced from somewhere else.

As with all extremes, it will eventually work itself out, but the economic pain will have social impacts for years to come. Will we have to suffer an economic collapse to third-world status to be competitive? I'd like for someone to be able to offer some reasoned hope that it's not a foregone conclusion. I doubt cafeterias do very well in the third world."


The thread is too obscure for the general reader, but there are some gems of wisdom there.

1 comment:

Hoots said...

Right. I would like to be wrong, but I'm afraid that what has happenend to our two companies is a microcosm of the greater economy. If that is even partially true, there will be a dear price to pay sometime in the future. There is a link between what happened to cafeterias and the whole phenomenon of outsourcing. I need for someone to help me understand how I am wrong in that opinion.