Why business people shoot themselves in the foot with politics

I heard it again last night – on NPR of all places. They said that the Democrats will make raising the minimum wage one of their first priorities – in no small part because most of the electorate thinks it’s a good idea. (Now there’s a concept.) But then they added that someone – I think they said Bush – would fight to exempt small companies from the devastating cost. The logic of that last statement is so out of touch with how my business works.

The traditional stand of pro-business thinkers is that anything the government does that costs them money is bad. That is way too short sighted for success. Here’s why. Anything you spend money on has a cost and also a benefit. The trick to a successful business is to spend money on those things that benefit your company and not on the other stuff. We know this when it comes to investing in equipment, advertising, training and that Lexus you drive (I’m sure it brings in a lot of sales). We know this because we can see the benefit directly connected to the investment.

Henry Ford knew this when he doubled – DOUBLED – the wage in his factories. Why? Because he as he said, cars don’t buy cars. In doing so, he was able to recruit and retain a better work force and more importantly, allow more people to buy his product, In effect he spent a little money to create a bigger market.

However, when the government makes us incur a cost we don’t always see the benefit so directly. That doesn’t mean there isn’t one. And of course just because the govt is spending money doesn’t mean there is a benefit – at least not one you and I enjoy. I know politicians can be stupid, selfish and corrupt.

My point is we have to look beyond the cost to see if the benefit is really there or not. And if it is, we have to make sure the money is well spent. If we do that, the government is in a unique position to help business. And by unique I mean no other institution on the planet is in a position to benefit your business like the government. Too bad we’ve had such jerks running the place. If you want more on this and like to read, check out Wealth & Democracy by Kevin Phillips.

Let me give you some examples. Obviously these are generalities and the devil is in the details.

Minimum wage. If you sell to normal people – not just the ultra rich, your company will do better if your market has more money to spend, and if they are able to make a decent living. A situation where the average CEO pay is a gazillion times more than the average worker is bad for most businesses. But left to their own devices, what board of directors would curb that? In fact you can argue that without a regulation that makes them pay everyone a fair wage, they’d be doing their shareholders a disservice to do so and put themselves at a competitive disadvantage. But with such a regulation that applies to everyone, they can be profitable in a situation where their customers are better off – and that’s good for business.

Health Care. If your customers and employees are sick, afraid they’ll be bankrupt if they get sick or in fact are bankrupt because a family member got sick that is bad for business. Health care costs somebody money. If you want to be “nice” or feel like you can get better workers if you spend some of that money fine. But if you’re in competition with someone who doesn’t, then they will have a lower cost basis than you and make it hard for you to compete in the market place. So, if done right, there should be a benefit to spreading the cost of health care in some even fashion so we all get the benefit. And have you noticed that compared to other countries we don’t get nearly the bang for the buck in this area that we could?.

The environment. Hasn’t anyone in power read The Tragedy of the Commons? You want protection from guys like Harry or they’ll put you out of business.

Alternative energy. What could be a more stupid waste of government money than to subsidize the oil industry? I’m talking direct subsidies as well as the security costs of propping up despotic regimes who happen to be built on oil fields. (No, I don’t mean Texas.) Look at the economic benefit this country got from a 10 year commitment of government spending to put a man on the moon.

We need the same kind of effort to develop alternative fuels that will allow us to be energy independent and environmentally beneficial. If we put our American ingenuity behind it (before someone else does) we’ll get the side benefit of developing a whole lot of high paying jobs in this country, and a lot of cool technology we can sell to the rest of the world. That would be a lot better use of the national debt than lowering Paris Hilton’s taxes.
Takeaway:

• My main point is that when it comes to political positions, the “traditional business thinking” is often bad for business.