The Paladino/Rudnick Battle

Part 4:  So Where Does that Leave Rudnick and the Partnership?

I’m a member of the Buffalo Niagara Partnership for the networking aspect; it gets me in front of people whom I would otherwise not get the opportunity to meet.  Some will argue that this benefit is not worth the dues one must pay to be a member and that’s a fine argument.  For now though, I’ll continue to pay my dues.

In addition to networking the BNP has (if I may paraphrase from their website) three other goals:

• Support of business growth
• Business services
• Political advocacy

The third item has always been controversial as not all members may think like Carl Paladino or I do, putting the Partnership in a position where virtually any political advocacy in which they engage is bound to alienate some of their members.

I am in full agreement that the BNP (and all Chambers of Commerce in WNY) need to recalibrate, but replacing its leadership with someone who fits Carl Paladino’s expectations is no different than what Tom Golisano is doing to the State Senate, and likely to result in as much chaos as construction.

I think that if you’re going to work in both the community and in the political realm, diplomacy is of utmost importance.  Carl’s diplomatic efforts are, well, erratic at best (and I wish I could emphasize how badly we need more people like Carl, if only he could color the arguments in a more positive way).  He sees the BNP, BNE and other local organizations as structures that are in such bad shape that they must be plowed under and rebuilt from the ground up.

I think that Andrew Rudnick’s public persona is one of civility and diplomacy.  But what he also does behind the scenes matters, especially if he is not following the Partnership Board’s directives.  This is important:  Corporate leaders are beholden to their boards, not the other way around.

Should Rudnick go?  A friend of mine suggested that all public leaders be subject to term limitations.  I find that term limits have merit as long as they don’t apply to me or anyone else doing a spectacular job in his/her position; fans of Rudy Giuliani would agree as well.

Boards remove their executives when they fail to accomplish the board’s strategic directives.  If the Board decided that the Partnership should recommend voting against every incumbent next November (I hope I hope I hope), and Rudnick fails to execute, then that’s grounds for dismissal.  If the Board decides to take less provocative or behind the scenes approaches and Andrew complies, then he’s doing his job.  If the CEO is doing as the Board wishes then the CEO is doing his job.  Paladino is screwing up the chance to foment real change because he’s shooting at the wrong target.  If he doesn’t like what Rudnick is doing he should focus his attention at the Board.

But really, when it comes to Upstate success stories I can’t think of a single organization (and I’ve been thinking about this for well over a month) that stands out as having produced major, consistent results over the past 15 years, the Partnership included.  And by major I mean consistently media-grabbing.  In that regard, even Carl has only his Thruway toll initiative to brag about; what else has he done that has made a real difference for the community?

This is in no way meant to impugn Carl; indeed, in private he seems extraordinarily gracious and charitable, and I suspect he has impacted this area in many small ways, as has the BNP, the BNE, Catholic Charities, UNYTS, the Red Cross and so many other organizations.  The problem is that none of us are creating blockbuster initiatives with major, consistent impact; and none of our very worthwhile behind-the-scenes activities will ever make the press.

Maybe it’s because we can’t create those initiatives.  Short of taking up arms – short of a revolution – none of us, collectively or otherwise, can make a revolutionary difference given the political structure of our city, county and state governments.

So that leaves an evolutionary approach, a strategy that the BNP appears to be addressing at least as well as any other group.  I don’t think replacing Andrew Rudnick is an agent of change any more than I think creating a new chamber of commerce would be an agent of change.

In summary: Two polarizing figures, two different approaches, neither one visibly successful on a regular basis but striving for the same thing.

They’d be so much more effective if they’d figure out how to work together.

The End.

The Paladino/Rudnick Battle

Part 3:  The Partnership, and the Paladino – Rudnick Love Affair

I mentioned in Part 1 of this blog post that the Buffalo Niagara Partnership offers its members some benefits that are informative and – in the case of the Movers and Shakers session with Senator Stachowski, highly entertaining.

Equally entertaining has been the recent media blitz headed by Carl Paladino to oust Andrew Rudnick as the head of the Partnership.  A quick review, according to the dozens of emails (53 actually, and counting) that Carl has sent to Partnership members past and current:

• Andrew stinks at his job;
• Andrew is a polarizing figure;
• Andrew should resign;
• Anyone on the Partnership Board of Directors who supports Andrew should resign;
• If this doesn’t happen in 60 days (clock started June 10^th, do the math) Carl will “…lead a concerted effort to form a new Chamber of Commerce to lead our community”.

I have lots of respect for Carl.  He’s a family man, passionate about Western New York and both times I’ve had the chance to talk with him he’s been cordial and even-tempered.  I’ve written of him in past posts and complimented him (sort of) in his quest for change within state government.  I think he’s a pretty cool guy, influential in the local area and keen on trying to make Buffalo a better place (within his lifetime; pretty far-fetched, no?)

But he’s also acting like a jerk, spitting venom and twisting reality with some numbers that I think he pulled out of some stinky orifice somewhere.  He would accomplish lots more if he’d can the bullshit and build consensus rather than further polarizing a polarized community.

The tone of Carl’s campaign goes beyond confrontational and would have better served the community had it focused on whether or not the Partnership is achieving its goals for the betterment of Western New York.  Instead it’s loaded with vitriol, supposition, lots of statistics (plenty of taint there) and loads of innuendo but not a lot of meat.  Questioning Rudnick’s role as CEO is one thing; blaming him for our dysfunctional city school system and lame politicians is a bit of stretch. That part I don’t get.

Many of the emails begin with Hey Andy.  This has become the campaign catchphrase.  The emails are hard to read not because of their rancor (they’re like a bad car accident; you know you shouldn’t slow down and look, still you must) but because they are replete with bad grammar and even worse spelling.  Carl should hit the spell-checker button now and then; really, it would help a lot, especially coming from an executive as high up the ladder as Carl.  Okay, this is selfish motivation on my part:  I want my kids left with the impression that it takes more than grade school mastery of spelling to achieve greatness, just so they stay in school!

Rudnick isn’t biting, at least not yet.  The Partnership’s board so far has taken the high road and delivered responses that are both cordial and boring, not at all controversial enough for media attention.  You know that full-page ad the Partnership put in the newspaper a few weeks ago?  I suggested that they proactively put in some catchphrases of their own, be creative and grab people’s attention in the first three sentences, maybe cut through the storm clouds with some sharp wit.  They opted for maturity – thoughtful but bland – not something that would draw media attention unless they paid for it.

In the midst of Carl’s Hey Andy emails was one regarding Uniland’s successful attempt to get state subsidies for its development of the Avant building, and how unfair that was to all us taxpayers and to businesses like his own “…that…have to go to bankrupcy [sic][you know you shouldn’t look but you must] court to address our mistakes or incompetence”.  But Carl forgot to mention that his own company got an Empire Zone extended so he could place high-priced condominiums in it, saving him close to $1 million in sales taxes.  The hypocrisy spoke volumes and made me realize that cronyism is a personal failing only when it’s being painted on someone else.

Rudnick and the Partnership have said little in response to this or other Paladino emails.

Gary Burns from Buffalo Business First asked Carl what he would do to fix things around here.  Carl’s responses followed an interesting pattern:  Repeal this law, Remove that politician, Close those schools, Allocate money to Western New York.  These are great ideas, and I am behind Carl all the way! And I’ll bet Andrew Rudnick would think these are great ideas too!  If only Carl were King of New York so he could implement these changes at will but he’s not so these solutions are nothing more than the same wistful thoughts all of us have.  Without going through the glacially slow and Carl-incompatible approach of working with the existing political structures, these changes will not occur, regardless of who is running the Partnership, the BNE or any other well-meaning organization, for that matter.

The problem with this battle is that it’s all Carl, yelling and screaming, demanding and getting media attention, throwing down the gauntlet and providing non-solutions while the Partnership and Rudnick try to take the high road and not settle into tit-for-tat trench warfare.  So you get this one-sided view of things which is tainted with opinion and innuendo dressed up as facts, when it didn’t need to be.

Yet Carl has a legitimate case.  Andrew Rudnick’s been a polarizing figure within an organization whose issues and opinions run the gamut from ultra-conservative to the radical left.  He and the Partnership can’t so much as sneeze without pissing off someone in that broad-spectrum constituency.  Carl should have kept it professional and leveraged concerns for Rudnick’s leadership into a more polished package, one that might have garnered both respect and influence from inside the Partnership board.  That he didn’t makes it all the harder to be an instrument of change but easy to be one of derision.  As a Partnership Board member and a corporate manager I find it hard to comprehend why Paladino would not try to maintain a professional mannerism on such a critical issue.  That he didn’t do this is a disappointment, and an impediment to progress.  As a successful business leader he knows darn well that the Partnership’s effectiveness comes down to the same questions asked of any organization:

• What are its goals?
• How well is it achieving these goals?
• How can the leadership facilitate achieving these goals?

I’m afraid that if I joined Carl’s Let’s Fire Andy crusade that I would be sorely disappointed the moment I disagreed with the direction that Carl takes his version of a Buffalo Chamber of Commerce, for it is clear from his emails that it’s Carl’s way or the wrong way:  In essence, he evokes the same attitude for which he is criticizing Rudnick.

And in spite of all the media attention, Carl is a one-trick pony:  He got the toll barriers removed.  Anything else?  Nothing comes to mind.  That he is a polarizing influence – without a really great track record – in a community that has been incredibly polarized for two generations does not convince me that he could do any better at running a chamber of commerce than Rudnick has done.

Next Up:  So where does that leave Rudnick and the Partnership?

There’s a New Building Project in Buffalo!

This would not be big news in any city with a bustling economy.  It’s major news here.

A bunch of people showed today up to a tent in a vacant lot and applauded everything and anyone and proclaimed that the new Kaleida Global Vascular Institute  is the best thing to happen to Buffalo since sliced bread.

10 politicians participated, so you know this was big.   The upside to this event was irresistible, even though most politicians hate sharing the limelight with other politicians.  That alone was telling:  This gathering was unique.

The downside is that it is unique.  Groundbreaking ceremonies for 300 million dollar projects are almost once in a lifetime occurrences in Western New York.  That put an edge on this celebration that I found discomforting.  All these people taking and giving credit, celebrating the all-too-rare win.

Well, that party’s over.  I wish for our political leaders not to bask inebriated-like in the glow of the Vascular Institute – as if this one building demonstrates how much they’ve accomplished – and instead get to work on the next project, and the next one after that.

Yearning for Those Friendly Skies

I loathe what air travel has become.  Used to be that flying made sense when travel by car would take more than 2 or 3 hours.  After 9/11 it was closer to 4 hours – making trips to Albany, Detroit or Pittsburgh more convenient by car than plane.  This past year, 6 hours’ drive time became my decision radius.

This week I debated if driving 7+ hours to Baltimore would be less stressful (and time-consuming) than arriving at the airport at least an hour before flight time, having my oversized can of shaving cream confiscated at security, waiting through incessant flight delays, being packed like sardines into the aircraft, developing motion sickness on the (very) turbulent flight, getting a lame rental car and driving the remaining distance to my hotel.

Flying to and from Baltimore saved me barely more than an hour in each direction.  And it was way more stressful than driving ever is.

Next time it’s going to be my car, a bunch of CDs, a list of NPR stations along the route and some coffee.  Air travel is too crazy.

Small Business Week in Buffalo

This past week was Small Business Week in Western New York.

• Monday:  UB’s Center for Entrepreneurial Leadership (CEL) annual meeting
• Tuesday:  Small Business Innovative Research grant writing seminar specifically targeted to small businesses and start-ups
• Tuesday Night:  Buffalo Niagara Partnership Endurance All-Stars event.
• Wednesday:  CEL Class of 2009 graduation ceremony
• Thursday:  UB Business Partners Day

Before you say “Small business, so what?  Who gives a crap?” know that small businesses account for half of all employment in the U.S., and since the mid-90s have created 60-80% of net new jobs.  A very recent NPR report cited that small businesses accounted for 100% of all new hiring in 2009 so far.  Small business is Western New York’s future, for God knows that until New York State’s government is overthrown changes we are not going to be attracting any large companies to this area despite the best efforts of the Buffalo Niagara Enterprise and our local politicians.

Some big corporations were represented at most of these events, too:  Moog, National Fuel, Greatbatch, M&T and others are sponsors of many of these programs, in part as a giveback to the community in which they operate.   I am grateful to the big guys who probably get little in return, other than some friendly PR.

UB Business Partners day was an unequivocal success.  Attendance was probably twice last year’s, and it will continue to grow.   UB and the CEL both recognize that entrepreneurialism is the seed by which business will blossom in Western New York.

Gross Incompetence Can Be Tolerated for Only So Long

There’s a fight going on in the Holland Central School district.  It’s the same fight being waged in many schools in Erie County: Too many teachers.

The teachers’ union (with the support of some parents) is resisting attempts by the Holland school board – with the support of other parents – to increase student-teacher ratios, especially in those grades with declining enrollment.  How much decline is there?  Well, the K-12 population of the school is currently 1,258 (last year’s graduating class:  99).  Next year’s kindergarten enrollment is currently estimated to be…less than 50.  Yet there are 6 kindergarten teachers.  Do the math and it is clear that in at least one grade there are probably too many teachers.

In Holland, this is a big issue.  It’s not even a blip on the Buffalo Public Schools radar.  In a bloated administrative system with an entrenched, uncooperative teachers union, a sense of victimization, isolation and systemic underachievement at all levels, the prospects for even incremental improvement to Buffalo’s public education seem remote.  Certainly, the examples set by union/administration feuding do not lend themselves to motivating students; and really, in the long run motivation is what it’s all about:  Motivated students will learn under any circumstances.

Holland is one of the most rural towns in Erie County and will spend $13,000 per student and graduate nearly all of them.  Buffalo on the other hand, spends upwards of $24,000 per student and will graduate less than half.  Holland’s board and the teachers will eventually reach some compromise.  Phil Rumore and James Williams will not.

What a tragedy for this area.  Most small businesses cannot offer jobs to those with such limited skills and worse, with little or no motivation.  The same local businesses starve for prospects because there are not enough skilled workers to go around.  And big businesses looking to possibly expand into the region?  Well, an educational system ranked at the bottom of the state drives one more nail into that coffin.

Our community’s future is being pissed away by a collectively incompetent group of professionals (and I use that word sarcastically) who appear intent on cutting the throats of the community around them.  It has taken us 50 years to get here, and we are guaranteeing at least 20 more years of another uneducated lost generation.

I get tired of watching so much money being thrown down a sewer; and greatly saddened that my analogy seems so appropriate.

The Next GM Pension Plan

Because of its long term pension liabilities, GM is worth more dead than alive.  I doubt any automaker or wealthy investor (other than the U.S. Government) will touch it prior to its evenutal bankruptcy.

The company’s crazy pension commitments are just crazy.   As of last year they were costing the company $1,300 per car.  With GM sales down something ridiculous – over 50% in February from the year prior – pension costs this year will cost over $2,000 per vehicle.

What’s a GM pensioner to do?  Well, nothing, really.  The pensioner can sit on his or her ass all he or she wants and will still collect until the company is sucked dry.  After that, who knows?  For some reason I think I’ll be helping to pick up the tab.

Here’s my suggestion after the bankruptcy:  Offer up a pension amount fixed at some amount per car.  Let’s say the company agrees to put $1,000 per car into the pension account.  Take the total car sales for the year, multiply by $1,000 and divide by the number of pensioners; that’s the amount each pensioner will get the following year.

This has some real advantages over the current scheme, mainly that pensioners could make out really well in good years, and they have an incentive to help GM make sure it has good years.  And I won’t have to subsidize them through some government support package.

Just a thought.

Wal-Mart and the Internet Cheapen Everything

The fill valve on my toilet broke for the third time in two years.  I blame the Internet.  And Wal-Mart.

Our refrigerators used to last 12 or 15 years; today they last 7 before the compressor burns out.  We shrug as if this is how it has always been.  It has not.  Our collective desire for cheap is an enabler that allows Wal-Mart and others to trade off quality for price and in the process lower our standards of acceptance.  Likewise, thirty years ago our highly competitive newspapers were thick with articles and quality writing because, well, because they were competing on a level playing field with other newspapers.  Today they are vacuous and on the verge of extinction, unable to beat free no matter how much they cut their overhead.  A major paper is shutting down nearly every week.

The creep toward cheap was relatively slow and insidious.  So was the decline in the resulting product quality.  It is our acceptance of this decline that chews at me.

Wal-Mart and the Internet have led this race to the bottom.  It’s a disease.  The first symptom was the societal shift toward diminished quality because it made products more economical.  Cheaper plastics.  Thinner metal.  Smaller sizes.  Fewer parts.  The Internet forced the print media to compromise as well.  Less research.  More opinion.  Fewer sources.  Poorer writing.  We sat back as the competitors to these low-cost suppliers lowered their costs – and reduced product quality – in a futile effort to remain competitive.

In the end, the only fill valve that I can get for my toilet is from the same manufacturer that made the last two.  I don’t expect the next replacement to last any longer than the others.

There will always be a few boutique stores and BMW-like merchandisers that put quality first; some of us will be willing to pay for that quality.  But for Everyman, Wal-Mart and the Internet will reign, churning out product that would have been unacceptable a generation ago.

Born-Again Savers

Wednesday night’s Daily Show blast of Jim Cramer and CNBC exposed how so many of us were duped by frenetic Wall Streeters who parlayed our money into something worth half of what it was a year ago.

We listened to people no smarter than we who were tantalized with 30 percent returns and conveniently forgot to mention that there is a difference between Savings, and Investments.

Now that financial advisors have found Jesus, they’ve once again started preaching about that difference; but only because they’re jobless if they can’t obtain more of our money.  They need us to be reformed investors, and born-again savers.

We have been repentant – kind of – and are saving again.  America’s savings rate grows with every recession, then plummets when the economy improves.   It has risen dramatically (see the little blip at the far right of the graph) after falling essentially to zero since 2005.  To ZERO.

Even in this worst of times we are not close to putting away enough of our income to avoid a cat food-based retirement.  The erosion of the Social Security net might persuade us to save more, you would think, but hi-def TVs and Starbucks are just too tempting.  We suck at saving but we’re great at believing our government will bail us out when the sky falls in 2020.

I still have many years before reaching retirement age and have a pretty good chance of getting there with enough savings to be comfortable.  I’m not so sure about my 64-year-old friend, who can no longer retire at the end of the year.

Missing the Boat

Commercial Plug for EG Tax

“I’m Esther Gulyas the Tax Lady.  I understand people are doing some pretty unusual things to save money this year.”

EG Tax’s television commercial “Frugal Me” follows that quote with Benny Hillish sketches of

• A family decked out in winter regalia warming themselves by the fireplace (a fake one at that)
• A goofy guy riding to work on a bicycle
• A voice demanding that all the lights be turned off

No offense to Esther Gulyas’ wacky commercials; I hope the business they attract pays for them 10 times over.  But the pretty unusual things are essentially

• Lowering the heat
• Using alternative transportation
• Conserving electricity

The commercial could have emphasized that doing these things and going to the Tax Lady would save oodles of money rather than playing one against the other, particularly in light of how silly energy conservation is made to look.

We need to collectively learn to conserve.  This could have been a great business ad and public service announcement rolled into one.  EG Tax should consider that next time.

Newspapers

As much as I enjoy reading the newspaper and hoping that print media doesn’t go the way of the dinosaur, yesterday’s notice that the Buffalo News is raising its weekday price from 50 to 75 cents is yet another nail in its coffin, probably one of the last nails at that.

No one under the age of 30 reads the newspaper.  Well, not really, but it was down to 33% in 2007, down from 40% in 2002 and way down from a generation ago.  Pick any age group and the trend is the same:  Print readership continues to decrease.

Newspapers have become vanilla shadows of their past.  And now they are becoming expensive enough for even me, a newspaper junkie, to question their value.  How does one justify the cost when the online version is free?

The joke “What’s black and white and read all over?” will soon be lost to the ages.

Innovate Buffalo Niagara

The Innovate Buffalo Niagara awards luncheon was held today at the Buffalo Convention Center.  The Buffalo Niagara Partnership’s now-yearly event highlighted 66 companies in 5 categories, from Advanced Manufacturing to Professional Services.  The winners got a nice plaque and a chance to bask in the limelight for about 10 seconds.

The place was full of optimism in spite of the current economic climate.  In a period where many businesses are shrinking, companies like Geico, Multisorb and Roswell Park Cancer Institute are adding to staff.  Granted these are companies whose business products are in most cases far removed from the heavy industries that made Buffalo great in the 50′s and a failure 20 years later, but that’s the point here:  This area will survive this economic downturn and grow far more quickly by having a diverse business environment than by relying on a few big players.  The 66 companies in the competition represent just how far, how quickly, we’ve come in terms of economic diversity.

We need more of these businesses.  Keep them coming, please.

Resumes

Since December I have received more unsolicited resumes than I can shake a stick at.  Some make for a great read but I cannot help these people right now, especially when most are asking for work in fields that we, a software development company, don’t offer.  I just don’t need to add a bridge inspector or statistician or tech writer to our staff.

Last year’s job losses nationally came in at around 3.1 million with the manufacturing, professional business services and construction sectors taking the biggest hits, and January hasn’t been kind either.  In just the past week eleven companies alone announced 76,000 jobs cuts and we have not hit the bottom of the layoff barrel.  Worse is the number of underemployed – it was 11% in October, and it’s growing and adding to our collective distress.  We are closing in on the 1982 unemployment numbers.

The strongest companies will survive – by working hard, sacrificing, focusing, by evolving and in some cases by sucking at the National teat.  (By the time the proposed $900 Billion stimulus package is finalized I’m sure every congressional district will contain at least one teat-sucker.)

I will work my ass off to make sure that my company successfully adapts to these times.

R.I.P. Analog Television

The Obama Administration has proposed delaying the abandonment of analog television beyond the current February 17th date.  President-elect Obama expressed concerns that America just wasn’t ready.

Analog TV in its current form dates back to 1939 (and 1953 for color broadcasts) and has essentially been obsolete for almost 20 years.  I recall articles in EE Times from the late 1980′s declaring that digital encoding standards and microelectronics had advanced to the point where high-definition signals would be ready for public broadcasting by 1992.  That never happened, and it took another 10 years before other countries – Japan and Germany in particular – leapfrogged the U.S. in establishing digital television as the standard.  The last official cutover date before this one was December 23, 2006.  Before that there were others.  [The FCC had hopeful expectations, unmatched by either the electronics industry or Congress.]

Half a decade later the U.S. is ready to forsake a 70-year-old technology and embrace a much more versatile broadcast media.  The transition will never be perfect no matter how hard Obama and Congress might want it to be, but it’s still long overdue.

If only we would move to eliminate the incandescent light bulb.  The tungsten filament will celebrate its 100th anniversary next year.  It too had a good run but really, it’s time to move on.

Medicine is Good

Last Thursday a nearly unattended event took place at the Zebro Room at Roswell Park.  The Buffalo News buried an article about it on page D10 of Friday’s paper.

PhRMA, the public affairs arm of the pharmaceutical industry, came to Buffalo to announce that medicine is good.  Nice guy (he really is) Nathan Tinker from the New York Biotech Association added that New York medicine is good.  And Tom Stewart (a really, really nice guy) told us that Western New York medicine is good.

Finally Ralphie from The Sopranos spoke about anti-depression medicine, and that this is good, too.

I thought PhRMA was coming to announce an event like

• they were curtailing superfluous consumer advertising and physician perks in order to reduce the overall cost of prescriptions.

Instead we got cheerleading from an industry trying to repair its tarnished image before Congress steps in to legislate lower-cost medications.

It seemed insincere.

State senator Bill Stachowski was there.  He looked glum.  I don’t think he’s gotten over losing that Senate Finance Committee chairmanship.

Energy Indpendence in Our Lifetime

(courtesy CNN)

John Hofmeister, former president of Shell Oil and now head of Citizens for Affordable Energy, spoke at WNED studios last Friday.  Parts of his speech were covered by the Buffalo News as well as the local television media.  An oil insider, Hofmeister made some great points that the media covered well.

That morning, John also spoke at the Buffalo Niagara Partnership’s Movers and Shakers series, making quite a few comments that didn’t make it into the paper or TV.  One of them was about the run up of oil prices this past summer.

Hofmeister pointed out that the dramatic rise in oil prices had nothing to do about speculation but about Asian aviation fuel demand and China’s preparation for the Olympics.  In its attempts to reduce smog, China demanded a change from burning coal for power to burning oil.  They basically bought up all the diesel fuel that they could, and this was principally responsible for the sudden increases.  Just as suddenly, demand pressure on diesel fuel started to drop shortly after the Olympics.

Interesting.   Since diesel is a middle distillate and gasoline is an upper distillate, one would think that as the world’s demand for diesel increases, a glut of gasoline (as a byproduct of the distillation process) will appear on the open market, depressing gasoline prices relative to diesel fuel.  This might make one question whether or not it is wise for the U.S., one of the few countries not fully converted to a diesel transportation infrastructure, to ever do so.

Hofmeister made a few other interesting comments:

• Without a huge improvement to mass transportation there is no way that dramatic rises in gasoline prices won’t strain many American budgets beyond their limits.  And suburban sprawl makes the mass transit solution untenable.  Because the U.S. has no infrastructure available to support alternative energy transportation in more than a niche manner, there are no short-term alternatives to the internal combustion engine through at least the next decade.
• When the U.S. was importing 35% of its oil from foreign countries the Nixon Administration, in 1973, declared that the U.S. would be oil independent in 5 years.  35 years later, 65% of our oil is imported and over that time no policies have been developed to reduce that dependence.
• You would think that the Department of Energy determines – or at least implements – energy policy in the U.S.  Nothing could be further from the truth.  There are 13 Executive branch agencies and 26 Congressional committees that determine policy, plus the courts.  Energy policy is determined politically.

Hofmeister was animated about his last point.  Unless Congress adapts the same model for energy policy as they do for monetary policy – an independent board modeled after the Federal Reserve – no solution to our energy woes will be found.  After 35 years, Congress has proven itself incapable of fixing the problems, and needs to relinquish policy control to an Energy Resources Board with teeth.

Big Business’ Dirty Little Secret

Several years ago my company’s average net receivable – the amount of time our customers wait before paying for our services – was just over 30 days.  Around 2002 that average started to rise, first to 45 days, then to 60.  Two years ago one of our largest customers – a big gorilla of a company – unilaterally raised their payment terms to 90 days.  Other companies followed their lead.  (So much for a contract being a contract.)

Last month the big gorilla sent us a letter indicating that they were again changing payment terms on our contracts to 120 days.  Any work we perform for this company today will generate payment to us in March.  To get payment we hope they survive that long, and that they don’t change the payment terms yet again.

Businesses that delay payments ruin our cash flow in order to preserve theirs.  The big companies are essentially using their suppliers as piggy banks to get cash – essentially for free – for which they would normally have to go to the banking industry to obtain.  Today’s tight credit markets will inspire many other companies to follow suit.  Picture yourself being told by your employer that your next paycheck will be delayed by a month.  Good luck staying atop your mortgage and utility bills.

With terms like this some companies are no longer potential clients of ours because we can’t justify the risk of their bankruptcy within that time frame.  Four months is too long in today’s economy to risk doing work in some teetering business sectors.

We’re just a tiny player in the game but luckily the big gorilla is only a small fraction of our business.  Pity the cash-poor companies dependent on a big gorilla for the bulk of their revenue, receiving the same letter as us.  Their cash flow is going to tank.

This is an artificial boost to the bottom lines of the S&P companies at the expense of everyone else.  Payment delays are a one-shot method to inflate the corporate balance sheet (and therefore the stock price) without addressing any underlying business problems.  Other than providing executives a way to hit their bonus targets I see no business upside to this practice.

So the stock prices of the Dow and the S&P are being silently buttressed by the small businesses being forced to subsidize them; and the small business community – still the heart of American capitalism – has its back to the wall because of it.

Business 101

If you’re going to borrow money for your company, the first thing any lender (outside of mom and dad) will ask for is a business plan.  You must have a plan that demonstrates how the borrowed money will successfully lead to business profits and eventual repayment.  This is as fundamental as it gets.

That the CEOs from GM, Ford and Chrysler did not so much as have a business plan to present to Congress says a great deal about their arrogance.  Or their incompetence.  Or both.

The act that the Big Three is trying to perpetrate on Congress goes way beyond contemptible.  It’s a shame that so many auto workers will pay so dearly for such inept management.

Just Say No!

With regard to saving the auto industry, there are at least two broad possibilities that have not been broached much by the media:

• Merger with and/or buyout by a foreign auto manufacturer, say, Toyota or Honda.
• Government aid not related to manufacturing operations but to the retirees that in large part are sucking the automaker dry.

I was not in favor of a financial bailout and I am not in favor of a direct auto bailout, either.  Management and the unions have only themselves and each other to blame for their predicament.  Americans voted with their pocketbooks years ago; it’s not like anyone other than GM management didn’t see this coming.

So instead of a bailout, consider those options above.

A buyout by a strong foreign manufacturer, however unlikely, is something that would change domestic management culture overnight.  A buyout (as opposed to a bankruptcy) would help to salvage the hundreds of parts suppliers on whom the foreign automakers rely just as heavily as the domestic auto companies.  The show-stoppers are health care, retirement obligations and the unions.  Especially the unions, who have far less leverage today than during strong economic periods; so if Toyota was to make a move, now would be a good time to buy into the domestic industry on the cheap.

The second idea is to improve competitive costs against foreign manufacturers by relieving the auto industry of a $1,500 per vehicle levy – retiree benefits – by taking them off the automakers’ hands, in return for ownership in the company.  Socialized health care and pensions for retirees.  Let’s call that, hmmm, Medicare and Social Security, respectively.

GM management will fight tooth and nail against the former, and the unions the latter.  So instead, Congress will be hard pressed not to take the easy way out and simply give the automakers a blank check with few strings attached.  It is the worst possible option, and the one they are likely to take.

La Mancha Negra, Part 2

So the answer to the question “What the heck were you doing in Caracas” is “Enjoying myself”.  I worked for a telecommunications company in the early 90′s and we had to make a trip – several trips – to support an installation of wireless units used by the banking industry.

And Caracas was a trip.  Really.  I went in the middle an attempted military uprising, and there were soldiers with guns, everywhere.  And lots of distant shooting at night – sounded like fireworks.  Since we were working with the banking industry it was especially tricky, what with private security forces and the military exchanging wary glances at each other as we would pull up to an ATM machine, electronic equipment in tow.

I loved the exotic nature of the city, and would go back in a heartbeat.  But it was especially frustrating because I was a runner, doing about 5 miles a day, and at that time no one ran in Caracas unless they were guilty of something, and those suspected of being guilty of something were often shot first, questioned later.  So I resorted to running up and down the 8 floors of stairs in my hotel.  It was not nearly as satisfying but it provided a workout.

I worked in a 26-story office complex with one working elevator.  People packed into it like sardines in spite of the weight alarm going off at every floor.  I took the stairs.

Caracas was (and still is) a typical large, third-world city, and is a great example of a middle-classless economy:  You end up with the filthy rich and the shantytown poor.  Just down a ways from the Gold District is a stream about the width of Tonawanda Creek, only it’s an open sewer.  You can smell it from blocks away.  Sanitation systems were and are not a high priority to the Venezuelan government.  Beggars with deformed body parts were everywhere.  And where they were not there were beautiful women and handsome men in fancy clothes.  If you had beauty – especially if you were a woman – you had a path to a great job; if not, you cleaned hotel bathrooms for a pittance.

It was obvious from La Mancha Negra that road construction, too, was not a high priority for the government.  Nor did there seem much in the way of decent health care or, for that matter, good educational facilities; though the Venezuelan government does have a pretty well-funded military.

While the U.S. has a long way before tumbling into such chaos, it is to our country’s advantage that we not let our middle class erode to the point where climbing back up becomes an exercize in futility.