Why big business and the banks are parasites on society

Assume you are a plumber, a good plumber. You do a good job and charge a fair price and your customer service is excellent. You do minimal advertising, an advert in the Yellow Pages and some leaflets around the local area.

Work increases gradually until you are turning away work you can’t fit in. You have three options: -

1. Carry on and be contented that you have full employment.
2. Increase your prices to control the demand and improve your income.
3. Employ someone to do the extra work.

Let’s assume that you take option 2 and increase you prices a little. Assuming you are still doing a good job and customer service is excellent there is no reason that most of your customers will not keep coming back. Some of the smaller less profitable jobs may disappear but these could easily be replaced to larger more profitable jobs and provided all else was equal the demand could soon outstrip supply again.

Let’s assume that at some point you employ someone. You could pay them what you used to charge and keep the price increases as your commission. This would probably be over generous as you would have to keep the books, deal with customer issues, pay tax and national insurance etc. However, you now have someone working for you and are able to take on more work. Increase your income and maybe get a bigger discount from suppliers.

Assuming all goes well and demand increases to outstrip supply again. You recruit another plumber, then another and another. At some stage these employees are going to need more management time that prevents you from being a plumber. Your suppliers need managing to get the best deals customer services in not the customers calling your mobile. Now you have two options:-

1. Carry on being a plumber and employ someone to manage the back office for you
2. Employ another field plumber so you can manage the back office

The danger with option 1 is that your back office person sees how to run the business employing plumbers and decides to set up on his own and steals all your customers and some of your employees. Not only are they in competition they have also set your business back as you seek to replace them the employees and the customers.

The danger with option 2 is that you are now doing a job you are not necessarily the best at doing and could easily get swamped by the day to day running of your organisation or fail to make the best of it.

Let’s assume you go for option 2 and as you expand you bring in someone to do the books, then someone to look after the customer service while you continue to look after the “lads”. Eventually you structure the team so there a regional team leaders able to get to jobs and support the lads in the field that come across problems.

By now you have around 50 plumbers in the field the over demand is not a problem anymore and the problem is to keep a steady flow of work in between the winter peak and the summer lull. So now you employ a sales man to try and win some company maintenance contracts. He needs some marketing blurb and a rate card and some introductory offers – entre a marketing person. As your company moves more towards the highly lucrative contacts with enterprises, councils and housing trusts you company is less and less like the jobbing plumber it started.

Winning large contracts becomes the focus and having the right sales people is the key to success in negotiating these large deals. The right sales person demands a high salary and a heft bonus.

What would your company do if best sales person left? Could it survive?

What would your company do if the best plumber left? Recruit a trainee?

What has happened? The company that started off selling plumbing services is now held to ransom by a small elite group of sales people that defend themselves by instilling fear of losing them. The core people that create the wealth, the plumbers, are less important.

The sales people have become the go-between. They bring the plumbing skills and the customer together. They add no value. The customer is buying the plumbing skill.

Bankers don’t create anything, let alone wealth. The simply bring savers and borrowers together. Unlike sales the bankers have the added luxury that the savers and borrowers don’t know each other. This enables the bankers to charge even higher commissions and means that replacing them would be more of a struggle at first.

Merchants

A quick note as preparing for an exam and my daughter gets married in a week, but I just had to push this out there.

As the world’s attention wander’s to Afghanistan, unemployment, the cost of fuel, the falling house prices, empty shops on the high street, MP’s expenses (by the way they should be done for fraud, just like anyone else would have been) and climate warming, we seem to be forgetting what kicked this all off. It was the Bankers and their greed. The bean counters that demand growth because that is what the spreadsheets said.

I should probably explain for those that don’t know cockney rhyming slang that Merchant is short for Merchant Banker which rhymes with Wanker

Merchant: “We must increase our loan business.”

Reason: “But everyone out there has got as much debt as they can handle”

Merchant: “Send them more info to get the to borrow more”

Reason: “But they won’t be able to pay it back”

Merchant: “Interesting! Are there any others that we could lend to that won’t be able to pay back?”

Reason: “Why would you want to do that?”

Merchant: “Because we’ll be able to hit our growth targets, and collect a big fat bonus”

Reason: “That’s madness”

Merchant: “It’s good innovative business strategy”

Well they are at it again paying themselves massive salaries and bonuses, even those that are majority owned by governments, where you would expect some restraint. Why?

They have sold the “fear factor”. They have somehow convinced there masters that this is the going rate. They are good people and if we don’t pay them this much they’ll leave to work somewhere else.

The reaction should be to show them the door, not bow down and give in. Anyone that has managed a team for any length of time will know, if someone thinks they are so important to the team that you cannot afford to lose them and they leverage that to get their own way, if you give in you’ve handed leadership of that team over, because they will be back asking for more and more. Eventually they'll leave anyway. By that time the rest of the team will have lost all respect in you as a leader too!

These people have destroyed other people’s lives and because they did it with a balance sheet and not napalm it seems to be OK. We should take note of the French Revolution and guillotine these latter-day aristocracy that act as if they are above the law.

They really have go off lightly and I can’t figure out why. I probably have the wrong spreadsheet!

I feel better now. Back to the exam revision.