The S.S. USA

While searching for a new topic for my blog, one thought that struck me over the Independence Day weekend is that this historic event that we celebrate each year is all about Choices.  The founding fathers of this great nation chose to be free from the oppression of the colonial masters and to be able to set off on the pursuit of equality, life, liberty and happiness.  Generations later, those pursuits continue and the ideals have not faded. 

As we try to find our way through the present period of economic uncertainty, high unemployment, soaring budget deficits, two drawn out wars, and a whole financial mess brought about by the housing bubble and unbridled greed, we are faced with choices that we must make.  Some of the choices will be hotly debated by people on both sides of the political and economic spectrum.  A healthy debate is always good but we must not let it turn into a mud-slinging match or allow ugly words and unfounded accusations tear us apart.  None of the choices will be easy and some will, with certainty, be painful but inevitable.  What is key to the success in our march forward is for everyone to grasp that we’re all in it together – we can either sink or swim.  As in generations past, we will need calm hearts and cool minds to make the balanced set of choices that will bring us safely back into harbor. 

To understand the dilemma we’re in, we need only to imagine that all of us are passengers aboard an ocean liner, the "S.S. USA".  There is a big gash on the side of the ocean liner and the ship's crew is fighting to keep the ship afloat.  We can opt to vent and scream at what the crew members are doing about the situation but that would clearly be not helpful.  Neither would throwing all of them overboard. Running a ship, let alone saving one, is not a simple task.  Blocking others from acting or doing nothing or simply hoping for a passing ship to come to the rescue are not the smartest moves either.  What we need are calm heads, constructive ideas (not rhetoric), and healthy debates that lead to smart choices.

Justifiable anger has been and continues to be vented against those who had helped create the financial mess and at the corporate executives at those ‘too-big-to-fail’ entities that had to be bailed out with taxpayers’ money.  To be clear, I don’t like government bailouts of private enterprises any more than the person next to me and I can’t agree more that none of the bail out moneys should have been used to pay bonuses to the same people whose callous actions helped bring about the crash.  That being said, the financial crisis called for quick thinking and difficult ‘on-the-spot’ choices had to be made.  Failure to act fast as the events were unfolding would have resulted in dire consequences and collateral damages too frightful to even ponder.  Imperfect as they were, TARP and the bailouts helped steady the S.S. USA so that it can be navigated back to shore.

I recently finished reading the book “Too Big To Fail” and it was an eye-opener on the behind the scenes dealings and decisions once the sequence of events that led to the collapse of Bear Stearns and subsequently Lehman Brothers started.  The heavy and momentous choices that the (then as well as the present) Treasury Secretary, the Chairman of the Federal Reserve, Congress, and the CEOs of the many financial institutions had to make at short notice, were mind numbing.  With hindsight, some might criticize those decisions but the reality was that time was a luxury they did not have. Events with potentially disastrous outcomes were happening at a rapid clip on a twenty-four hour clock cycle.  If nothing was done immediately, the destructive forces could have accelerated and spread across the globe in a more catastrophic manner.

What brought about the near financial crisis was a series of poor choices.  Homebuyers chose to borrow more than what they could reasonably repay even when they had jobs.  Mortgage brokers chose to falsify records or ignore sound financial requirements in order to close the deal and get their commission.  Investment banks chose to buy up those mortgages, repackage them as mortgage based securities - masking the high risk of default behind those mortgages - and sold them off to investors, earning a hefty fee in the process.  We could go on but I think the point has been made – poor choices can only lead to ruinous ends.

The frightening thing is that most of us will continue to make poor choices for selfish reasons and short term rewards.  Recent examples: We chose to punish those who are unemployed in this current economic downturn by cutting off their unemployment benefits.  We chose to rail against regulations and controls that are meant to better ensure we won’t have a repeat performance of the recent financial meltdown.  We chose to demonize healthcare realities and the inevitable end-of-life decisions we must all make.  We continue to choose to close a blind eye to the cost of unfunded programs and wars.

We can change the direction of the ship and steer it into a safe harbor by making choices that will shift the balance back towards a greater focus on the American people.  Our elected officials must make choices that will ensure that small and medium sized enterprises that form the backbone of the US economy have every incentive necessary to hire, train and retain staff.  Our appointed official must negotiate more balance trade agreements with other nations and ensure adherence.  As consumers, we must leverage our consumption power and choices to help keep good paying jobs in the US. 

Choice, after all, is what “Government BY the people and FOR the people” is all about. 

Remember, we are all aboard the S.S. USA. 

Venturing into a “No-Fly” Zone

According to The Associated Press, British Airways (BA) announced that with effect from October 7, 2009, it will start charging passengers who want to chose their seats in advance – 10 pounds for an economy class flight within Europe; 20 pounds for a long-haul economy flight and a whopping 50 pounds for an exit row seat. Even business-class passengers are not spared, having to pay 20 to 60 pounds depending on whether it is a short or long haul flight.

I expect BA to reverse its decision soon enough – it is plain dumb and reflects a desperation on its management’s part to raise revenues at all costs, even at the risk of losing customers. It is fascinating (and frightening) that BA’s management should even contemplate that their loyal customers will be happy to part with more of their hard earned money at a time of economic uncertainty, simply for the privilege of flying on BA.

I can understand charging more for seats based on the amount of leg-room or the degree a seat can recline (both clearly class related), even if those seats are in the same economy cabin – that is what most US airlines are already doing - but charging a hefty fee for the “privilege” of picking seats in the less desirable section of the cabin is clearly over-reaching.

All is well if enough passengers are prepared to fork out the extra dough to pick their own seats in advance, but what if that scenario does not play out? Imagine the anguish and the anger when a family with an infant are assigned seats that are spread around the cabin – who will tend to the child when he/she cries?. Imagine the annoyance when a couple leaving on a honeymoon are assigned seats that are far apart – great way to begin a life of togetherness. Imagine an elderly person susceptible to incontinence being assigned to a seat away from the aisle and the bathrooms.

Oh, sure, the gate-agents can reassign seats to accommodate those with special needs but should there be enough cases of those same special needs on a single flight, it will be a nightmare for the gate agents as each seat reassigned may raise a whole new set of problems and consequences. Expect take-off delays or having to arrive at the airport hours in advance to beg or fight for seat reassignments.

Thanks to the Internet, Airlines were able to push the task of seat selection to the consumers thereby cut down staffing at the gate and saving millions in payroll costs. By allowing passengers to pick their own seats, they also end up with customers who are generally happier, especially on flights that are not filled to the capacity. Passengers will almost always chose to spread themselves out (leaving the middle seats empty, etc) and their overall flying experience is enhanced with no further effort by the airline.

BA’s decision effectively reverses that and it will be interesting to watch what happens. I would very much doubt that they would be able to greatly raise their revenues because of that decision, especially on the short-haul flights and as long as there is stiff competition from other airlines. Without a doubt, BA’s competitors will use BA’s newly announced seat-selection-charge as a leverage to snap up all the disgruntled BA customers.

Clearly, the latest business decision by BA is questionable at best and destructive to its customer base and loyalty at worst. It is venturing into a “no-fly” zone as far as customer tolerance is concerned. Airline passengers are already bullied into cramped seats, checked baggage charges and no free-meal service on board. What’s next, charging for the ‘privilege’ of being able to breath on board a flight?

Invest Wisely

It may be a surprise to you if I were to tell you that we (you and I) make investment decisions daily – we don’t have to be a player in the stock market to make investment decisions.

Don’t believe me? Just think of what you had to do today.

Most likely, you woke up to the sound of your alarm clock – that reliable bedside gadget that greets you each morning with a loud jarring noise or, preferably, with some soothing sounds to ease you into your day. It was a tiny but necessary investment and, in addition to the cash you had to spend, you probably had to invest some time to test the ring tones on a number of alarm clocks before you found the one that you liked.

Having rubbed the last bit of sleep from your eyes, you headed for the showers and invested time in prepping your body for the day. You took care of your oral health, the way your hair looks, and, if you like to deepen the mystique, the ‘je ne sais quoi’ or the ‘something in the air’ about you, your daily routine ended with your dabbing on some cologne, after shave or eau de toilette.

Your decision on the clothes you wore was likely influenced by your knowledge of the type of meetings or occasions you have on your schedule for the day. If a meeting or an occasion was important enough, you would choose to put on an outfit with matching accessories – an ensemble that would make a statement - for which you had invested a handsome amount of money and set aside for just such events.

I think you get the drift. We are always investing – consciously or subconsciously – and if we think of our daily actions as such, we would most likely be smarter about our choices because we would be forced to think about the payback.

Investing in a healthy, balanced daily diet will yield us years of good health and fewer visits to the doctors for all kinds of preventable ills. Investing in our continuing education and awareness of the changes in the world around us will keep us one step ahead of our competitors and prepare us for the challenges ahead. Investing time with family, friends, colleagues and social networks (religious, professional, etc.) will enrich our lives together and our ability to interact and react, and to accept each other, warts and all. Investing in cleaning up and keeping our environment healthy will allow us and future generations to live and breathe on this earth for many, many more years. Investing in teaching love and respect for ourselves and for others who are less fortunate and in need of a helping hand will help counter the actions of those who chose to teach fear, hate and bigotry, perpetuating wars and needless killing.

If we learned anything in 2008, it is clear that we cannot afford to sit idly and quietly, and hope that the near collapse of the financial, insurance, auto and other industries due to weakened controls and accountability will not happen again. As investors in the many companies that the government has bailed out (whether or not we were for it), we have a duty to require of those in whom we have put our trust to give a clear accounting of their actions and results. Our economy, our country and our future depend on us being wise investors.

When I was in my early teens, I had a plain looking poster that had an image of an apple with a good chunk bitten off the top right corner. Beneath the picture were the words “Today is the First Day of the Rest of Your Life”. It conjures up the image of Adam and Eve taking a bite from the fruit of the tree of knowledge of good and evil and forever lost their innocence. I think that sums it up nicely – what we chose to do today will have a bearing on the rest of our lives and the lives of those around us.

As we head into the New Year, it is my hope that we can and we will think of our decisions and actions as investments in the future and that we will do so wisely. We all had a bite of that bitter fruit in 2008 and we are no longer innocent.