There is an old story about two “down home” brothers in NY state and their bankrupt Christmas tree business. (The full story is in the podcast.) They had a failed business model, but were convinced that expansion–hoping for “economies of scale”–would fix it. As silly as that sounds, the same thing goes on all around us.
Businesses; as many die of “success”, i.e., drown in their own juices, as die from lack of customers. Cash–and lots of it–is required to grow. Business is a game; you run out of cash, you’re out of the game.
Myth of “economies of scale”. The brothers in our story made this mistake. As do many, many others. Without a plan and constant attention to detail, your business will cost more per transaction, per unit, as you grow. Perhaps you grow to be twice as big, but with costs three times as big if you are not careful.
Same with government. A great example of diseconomies of scale?
Public schools continue to grow. Are they getting any better, despite the overall growth in cost per pupil? Overall in government, are roads, healthcare, public pension funds, etc., yielding better service? Is the massive increase in state and federal spending–with the attendant crippling increase in debt–giving us anything close to the same level of increase in government services? What is it that you see?
Better lifestyle comes mainly from better technology; competing private businesses driving prices down while providing better products and services. For example, 50 years ago there were no computers or cell phones, and AC was so rare that movie theaters made a big point of advertising it. Who cares what is playing, let’s just get in out of the heat!
Not as much benefit derives from more or bigger government. Government, by definition, does not compete and work to supply more for less that way; it simply provides, and needs watchdogs to keep costs down and services high. Are the politicians effective watchdogs? Do you believe in unicorns? We must be the watchdogs. And we can start right here at Results With Reason.
And remember the story of the Brothers and their tree business. Absurd, and well and truly going on all around us all the time.
Personal aside, do you follow football. The NFL Draft is coming up. Thoughts? Concerns? Brags?
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It is time for our usual parting thought. For us at Results With Reason, it is not simply change your thinking, change your life. It is change your thinking, change your actions, change the world. And if you can do it in love and enjoy the people around you at the same time, all the better. Remember: Knowledge by itself is the booby prize.
Will Luden, writing from my home office at 7,200’ in Colorado Springs.