Normative vs. normal business
May. 17th, 2009 08:12 am![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
snousleAn article in the Atlantic about bankruptcy has prompted some reflection on the ways people think about business.
It seems to me that there is way too much emphasis on the "normative" case in business transactions - the idea that people will follow through on their commitments, that they will repay their loans, that they will not cheat. In reality, while "plan A" is still necessary to hang things off of, business is generally dominated by plans B, C, D, and most importantly, plan F. FAIL. This paragraph is very dear to my heart, but on reading it, it occurred to me that many people may not appreciate this:
Look at entrepreneurs. All of the business literature indicates that starting a business is a phenomenally stupid thing to do. Most new businesses fail, and not simply because most would-be entrepreneurs are actually no-hopers. Even people who have founded successful companies in the past still have a 70 percent chance of failing.
I've long been amused by people who would tell me that I should "open a restaurant". I always respond that "telling a good cook that he should open a restaurant is like telling a beautiful woman that she should become a prostitute." That usually shuts them up. ;-) But while true, that isn't really how I feel. When I hear this phrase, what registers in my mind is more along the lines of "You should throw your entire life, all your money, your health, and your relationships into a big sucking black hole so that we may be entertained by your struggle and eventual failure."
Of course, that's not what anyone intends to say, at least not the innocent ones who can only see the normative case. To them, restaurants must be fabulous money-earners, because they spend so much for dinner, eating ingredients that cost less than a third of the final bill. And how much can it cost to pay a dishwasher? Surely businesses of all kinds must be tremendous cash cows, right?
Heh. If only. Of course, a few businesses are tremendously successful, and they're the ones that get talked about. But for the others, well, things don't work out quite as planned, do they? Right off the top, I have always allocated 15% of every transaction for what I call the "bullshit tax" - mostly benign parasitism, mixed with some fraud, basically what you'd expect from a warm body of money exposed to clouds of economic mosquitoes. This is not "normative", but the key to success is understanding that this is normal - one must not react with indignity at the Tremendous Injustice Of It All, but with pragmatic steps to limit the bleeding.
A particular case springs to mind - we once loaned $70K to a business, with all the proper paperwork, and the loan itself secured by a brand-new robotic device worth considerably more than that. Of course, what we didn't know was that the instrument was already used as security for a more senior loan, so we damned near lost the whole amount. (It took years, but we did eventually get it all back.)
I guess this is so prominent in my mind because I was brought up to see entrepreneurship as a virtue. When I was younger, the Canadian government went to quite a bit of trouble to round up their most talented youth and drill into their heads that starting an innovative business was not just desirable, but almost a patriotic duty. This now strikes me as one of the Big Lies that elders tell to young people who don't know any better. Dulce et decorum est... Not that I'm bitter, just incredulous.
We are entering into a period where the US is about to let go of normative finances. When plan A goes out the window, and plan B is already falling apart, what happens is largely a matter of raw power, and those who cling to "rules" and normative conditions to defend their position are left rather helpless. It is personally vexing to me that, for example, people who cashed out on their homes are going to end up with "renegotiated" mortgages that essentially give them free money, though I have to say I wouldn't want to trade places with any of them.
As the article points out, none of this is "fair", and we don't want it to be fair. The demand for fairness turns out to be a destructive force. It's important to understand in this phase that the economy is not "destroyed". But what is happening seems comparable to what I have long thought to be the most traumatic game possible - musical chairs. No matter how many chairs you've got, you only have to take away one of them to make everyone miserable and anxious. Letting go of the normative world is horrible, because nobody knows where they're going to sit once the music stops. But once you realize that normative is not normal, and playing by the rules has always been an unreasonable expectation, it is at least possible to re-evaluate the situation and come up with a reasonable response.
Not sure how to tie all these points into some big thesis or anything, this is just what's been rolling around in my head lately.
It seems to me that there is way too much emphasis on the "normative" case in business transactions - the idea that people will follow through on their commitments, that they will repay their loans, that they will not cheat. In reality, while "plan A" is still necessary to hang things off of, business is generally dominated by plans B, C, D, and most importantly, plan F. FAIL. This paragraph is very dear to my heart, but on reading it, it occurred to me that many people may not appreciate this:
Look at entrepreneurs. All of the business literature indicates that starting a business is a phenomenally stupid thing to do. Most new businesses fail, and not simply because most would-be entrepreneurs are actually no-hopers. Even people who have founded successful companies in the past still have a 70 percent chance of failing.
I've long been amused by people who would tell me that I should "open a restaurant". I always respond that "telling a good cook that he should open a restaurant is like telling a beautiful woman that she should become a prostitute." That usually shuts them up. ;-) But while true, that isn't really how I feel. When I hear this phrase, what registers in my mind is more along the lines of "You should throw your entire life, all your money, your health, and your relationships into a big sucking black hole so that we may be entertained by your struggle and eventual failure."
Of course, that's not what anyone intends to say, at least not the innocent ones who can only see the normative case. To them, restaurants must be fabulous money-earners, because they spend so much for dinner, eating ingredients that cost less than a third of the final bill. And how much can it cost to pay a dishwasher? Surely businesses of all kinds must be tremendous cash cows, right?
Heh. If only. Of course, a few businesses are tremendously successful, and they're the ones that get talked about. But for the others, well, things don't work out quite as planned, do they? Right off the top, I have always allocated 15% of every transaction for what I call the "bullshit tax" - mostly benign parasitism, mixed with some fraud, basically what you'd expect from a warm body of money exposed to clouds of economic mosquitoes. This is not "normative", but the key to success is understanding that this is normal - one must not react with indignity at the Tremendous Injustice Of It All, but with pragmatic steps to limit the bleeding.
A particular case springs to mind - we once loaned $70K to a business, with all the proper paperwork, and the loan itself secured by a brand-new robotic device worth considerably more than that. Of course, what we didn't know was that the instrument was already used as security for a more senior loan, so we damned near lost the whole amount. (It took years, but we did eventually get it all back.)
I guess this is so prominent in my mind because I was brought up to see entrepreneurship as a virtue. When I was younger, the Canadian government went to quite a bit of trouble to round up their most talented youth and drill into their heads that starting an innovative business was not just desirable, but almost a patriotic duty. This now strikes me as one of the Big Lies that elders tell to young people who don't know any better. Dulce et decorum est... Not that I'm bitter, just incredulous.
We are entering into a period where the US is about to let go of normative finances. When plan A goes out the window, and plan B is already falling apart, what happens is largely a matter of raw power, and those who cling to "rules" and normative conditions to defend their position are left rather helpless. It is personally vexing to me that, for example, people who cashed out on their homes are going to end up with "renegotiated" mortgages that essentially give them free money, though I have to say I wouldn't want to trade places with any of them.
As the article points out, none of this is "fair", and we don't want it to be fair. The demand for fairness turns out to be a destructive force. It's important to understand in this phase that the economy is not "destroyed". But what is happening seems comparable to what I have long thought to be the most traumatic game possible - musical chairs. No matter how many chairs you've got, you only have to take away one of them to make everyone miserable and anxious. Letting go of the normative world is horrible, because nobody knows where they're going to sit once the music stops. But once you realize that normative is not normal, and playing by the rules has always been an unreasonable expectation, it is at least possible to re-evaluate the situation and come up with a reasonable response.
Not sure how to tie all these points into some big thesis or anything, this is just what's been rolling around in my head lately.
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Date: 2009-05-18 02:47 am (UTC)I respect that; he's a very slow-food sort of chef, and his art although great doesn't need to be shared with paying people - I'm going through the art vs money dilemma with the portrait photography tbh.
Do I want to learn how to make portraits that people want (blandly lit; fairly vapid; yet flattering), or do portraits I want to do, which like my DJing they probably don't want to pay for or listen to?
I don't have the answer to that yet, sadly. And not sure I can reach a happy medium...but staying in my line of work is not an option anymore, going a bit crazy doing advertising for crap films and creating those web banners that everyone ignores - creating stuff that people ignore is pretty soul-destroying, even if it pays the bills. And I can't see myself doing another 5 years of this, let alone 10-20-30.