Recently by Gary North: Ron Paul: The Greatest Master of Political Rhetoric Since Reagan
It has happened before. I did not plan on it happening again.
On Wednesday, January 4, the server system that hosts my website, http://GaryNorth.com, crashed.
I did not get fired by my paying subscribers. I got fired by digits that failed.
Fortunately, I was re-hired on Friday. The site came back online.
This is the sort of risk that most people avoid most of the time. Because of the free market economy, there is an extensive division of labor. We have fallback positions. Usually these work, but not always.
MAKING OTHER PLANS
Things change. This is a fact of life. Nothing stays the same. We like to think things will get better when they change. Usually, they do. But things tend not to get better in a straight line.
I like the words of songwriter and guitarist Gamble Rogers, which were later made famous by John Lennon: “Life is what happens to you when you’re busy making other plans.”
There is a phrase in software circles that salesmen love to use: “seamless transition.” Never believe it.
We like to think that changes in our lives will be seamless. They usually are. Then one fine day, one of them isn’t.
Some changes we know will not be seamless. Getting married isn’t. Deaths in a family aren’t. Getting fired isn’t. But we also know that marriages bring increased productivity to match increased risk. The family is a great form of insurance – the greatest in most cases. The same is true of a job. The checks come every month. Work imposes a routine. A person knows what to expect the next day. This is a great comfort.
But then comes a crisis. Maybe your business fails. People employed by Kodak seem to be facing this. Here was a company that was on top in 1994, the year that it spun off Eastman Chemical. Eastman Chemical continues to prosper. Kodak faces bankruptcy.
Kodak was a major firm for over a century. It supplied an important product. The company kept improving its product line. It looked invulnerable. In film, it was.
Then digital photography arrived. Guess who invented it? A Kodak employee. That was in 1975. You can see the original camera here. The top executives thought there was no future to it. They did nothing with this technology. The technology has now done something with Kodak: bankrupted it.
[Note: if you want a great pocket camcorder that has an external microphone jack, you had better buy a Kodak PlayTouch soon. The external microphone jack is its unique selling proposition. No other Flip-type camcorder has it. So did Kodak's Zi8. When Kodak took it off the market a year ago, you could buy one for $90. Today, it will cost you over $300 on Amazon. Typical of Kodak is this: the Kodak page promoting the PlayTouch does not mention the external mic jack. There are good reasons why the company is close to bankruptcy.] Xerox had no use for the graphic user interface (GUI) and mouse system that its Palo Alto Research Center developed. Steve Jobs did. We read on Wikipedia: “The first successful commercial GUI product was the Apple Macintosh, which was heavily inspired by PARC’s work; Xerox was allowed to buy pre-IPO stock from Apple, in exchange for engineer visits and an understanding that Apple would create a GUI product.” I hope the company bought a lot of Apple stock . . . and did not sell it.
Kodak and Xerox were busy making other plans.
PLAN REVISION AND LIBERTY
The heart of the power of the free market is that it encourages producers and consumers to revise their plans. Producers think they know what customers want to buy, but customers can and do change their plans.
Customers think they know what they want to buy. Then they see a new, improved model sold by someone else. They change their plans.
This process is going on 24×7, all over the world. Tastes change. Expectations change. Opportunities change. We revise our plans accordingly.
The free market economist F. A. Hayek described the free market as a process of discovery. He emphasized plan revision. Austrian School economists Israel Kirzner and Roger Garrison focus on this aspect of Hayek’s work.
While market economies are better coordinated than can be accounted for by references to deliberate planning, they are always less than fully coordinated, hence the coordination problem. In one important sense, coordination failures are an integral part of an ongoing market process that iterates towards a greater degree of coordination. An oversupply or undersupply of some particular good, for instance, is evidence that the plans of producers and consumers of that good are not well coordinated one with the other. But the discoordination itself provides both an indication of the inconsistency in plans and the incentive for producers and consumers to make the appropriate adjustments.
The customer asks the seller, “What have you done for me lately?” He also asks: “What’s your best price?” These days, he need not ask. He searches Google. This is changing marketing. Price competition was always a major benefit of the free market. With search costs falling, price competition is a way of life. Sellers that cannot respond to the new conditions close their doors.
This is all for the good of customers. It is not good for millions of sellers. They must adjust their plans.
ONWARD AND UPWARD
I have been fired twice in my life. I have quit three times. In each case, my life improved because my productivity improved. But my life did not improve immediately. The transitions were not all seamless.
When approximately 136 voters in Ron Paul’s district voted for Bob Gammage instead of Paul in November 1976, I lost my job. I had been his economic analyst and newsletter writer, beginning in June. If 136 voters had voted the other way – out of 180,000+ – I would have remained in Washington. I have written about that transition here: “Confessions of a Washington Reject.”
Howard Ruff hired me a month or two later. That let me continue learning how to write direct-mail advertising copy for my newsletter, Remnant Review, which I had launched in 1974, the same year that Ruff launched The Ruff Times. Two years later, I wrote an ad that pulled in about $500,000 in new subscriptions – well over a million dollars today. Maybe I would have written it if I had still been in Washington, but I doubt it.
On the whole, I have found this chorus to be accurate: When one door closes, then one will open. When something’s wrong, something’s bound to be right. There is a new beginning, ’cause something’s ending. And the promise of a sunrise deep in the darkest night.
This is a variation of what the apostle Paul wrote. “And we know that all things work together for good to them that love God, to them who are the called according to his purpose” (Romans 8:28).
More voters should have voted for Ron Paul in 1976. They didn’t. He went back to Texas, delivered babies, recorded his weekly Code-A-Phone answering machine broadcasts on Washington, and got elected in 1978. I wrote my newsletters and ads for my newsletters. Things worked out.
Getting fired is one of life’s more unpleasant transitions. Quitting before you get fired is less disrupting. Quitting when staying on will keep you from making a mark is wise, but risky. You may not make that mark. But if you don’t quit, you may spend the rest of your life looking over your shoulder and wondering if you made the wrong choice. I don’t recommend second-guessing yourself, but people do it. The guy who owned 10% of Apple computers and who sold his shares back to Jobs and Wozniak for $2,300 made a bad move. We have phrases to deal with such decisions. “It’s water under the bridge.” “There’s no use crying over spilt milk.” “Easy come, easy go.” “It seemed like a good idea at the time.” “Life goes on.”
MONEY AS A LIFEBOAT
The reason why money exists is this: people do not know the future. They don’t know what they will want to buy or when, who will want to buy what they are selling at that time, and what will happen in between. So, they accumulate money. Money was defined best by Ludwig von Mises: the most marketable commodity.
Money has a broad market. It is liquid. You do not have to persuade anyone to accept it. You don’t have to offer a discount. You don’t need to spend money on advertising. The question, “Would anyone like to sell me this?” is usually met with a positive reaction.
When you are forced to make a transition that comes upon you unexpectedly, money helps make the transition more orderly. Money makes transitions more seamless.
The miser is a familiar figure in literature. He is seen as emotionally disturbed. A miser does not pile up money to buy other things. He sells things to pile up money. A miser does not fear the future that much. At some point, he has enough money to buy his way out of everything that offers an escape in exchange for money. How many unpleasant transitions is he expecting? The big one is coming. “How much did he leave behind?” “All of it!”
There is a rule of thumb for saving. Have six months’ living expenses in a bank. It’s a good rule of thumb. It depends on your profession. If you are highly specialized and well paid, you may need a year in reserve. You may not be able to find a comparable job at comparable pay. Highly specialized people face more volatility in the employment market than unspecialized workers. “When you’re hot, you’re hot. And when you’re not, you’re not.” Someone who is well paid in a specialized field would be wise to have a year’s expenses in the bank. He had better also have a blog site, a LinkedIn account, and a network of people in his profession who respect his work.
Money is good as you get older. Your recovery time is less. Your ability to adjust is less. Your age group is out of favor with employers.
Money serves as a lifeboat in a sea of unpredictable storms. It is also great for buying used items from hard-pressed sellers who have run out of money. They want money. They must offer discounts in order to buy money with their used goods. Craigslist is filled with these offers.
I have money in reserve. I plan to buy some houses to rent in the near future. I will rent them to people who cannot secure credit to buy something comparable. At my age, I will pay cash and live on the rent. If I were 30, I would buy with a mortgage and build equity.
I think this is a good time to buy distressed homes, meaning good homes sold by distressed people. The idea here is to buy a less liquid item from someone seeking money. He wants money now. You want money later. Deals are possible.
If I can offer cash without delay, and someone needs cash without delay, I can get a steep discount on a house.
Recently, I received notification of a foreclosed home being sold by a local bank. The bank is asking $139,000 for a 1,900 square foot home in a decent neighborhood. The house needs $2,000 in repairs. This means $5,000. But the listing reveals that the market price of that home is $96,000 to $112,000. The bank will sit on that house at $139,000. In a few weeks, I may make an offer.
Panic is never a wise response. If you get fired, start searching. Put in 10 hours a day, six days a week, looking for work. Lower your expectations. Contact a lot of people you know in the field.
You might even consider starting out in a field you rejected long ago. If you have money and no debt, you may be able to make the transition.
If you can sell face to face, you’ll eat. If you can write an effective ad, you’ll eat.
This is a big economy. There are lots of employers looking for competent, dedicated workers. Such workers are in short supply at the going wage. Make an offer.
I know what it is to be unemployed. It’s miserable. But it’s the cost of moving out and moving up. Sometimes, we need motivation.