Business Tools Blog

BearonBusiness wrote in Antonym of a Bailout:

Instead of giving $100B to a struggling bank or a broken auto maker, give it to a company that is doing well.

The post makes sense, so logical that I was surprised that there isn’t a public outcry to do exactly that.  Haven’t the banks proven time and time again?  The Spa Scandals, Executive Bonuses and Las Vegas retreats are a vivid reminder that throwing good money after bad is a slippery slope.

As I’ve thought about this post, it occurred to me that we were interfering in a process not dissimilar to Darwin’s Natural Selection. Joseph Schumpeter described this concept as “creative destruction,” where “the fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers, goods, the new methods of production or transportation, the new markets.”

To continue this line of thinking, it seems that a healthy economy exists only in an environment that favors diversity, and doesn’t have a government that plays “God” picking which companies will survive and which will fail based on fear or favors.

What would have happened if Woodrow Wilson had bailed out The Columbus Buggy Company in 1913?  The factory employed more than 1,000 people.  Columbus, Ohio was a Buggy manufacturing hub much like Detroit is the hub of the auto industry.  When Henry Ford rolled out the assembly line, the buggy factories couldn’t compete.  Because of Columbus’ geographic location, retooling their factories wasn’t a viable option (they weren’t able to get the raw materials needed to produce steel). It took 5 years from the date when the Model-T was introduced for the Columbus Buggy Company to go bankrupt.  But there was no bailout.

In 1914 Ford started paying $5 per day (more than double the average rate) which gave birth to the American Middle Class and modern consumerism. And Ford made clear how he viewed a government bailout …

Let them fail; let everybody fail! I made my fortune when I had nothing to start with, by myself and my own ideas. Let other people do the same thing. If I lose everything in the collapse of our financial structure, I will start in at the beginning and build it up again. —- Henry Ford, 1934

And it’s easy to see why Ford was so sure of himself 75 years ago - the American Auto Industry was changing the world. This video captures just how amazing the assembly line was … these workers were hopping!

Finding the best banks to deposit your money is harder these days than it’s ever been. Finding the best savings accounts isn’t just about rates but about how stable the bank is. With 23 banks that have failed so far in 2009 it’s worth taking the time to research the banks a little. As the same with credit cards you should always do your homework before choosing an establishment to place your money.