MacRaven - Dave Haxton's Weblog

Mon, 22 May 2006

A comment came in this morning on this post from April 16th of this year, concerning the massive retirement package given to the CEO at Exxon/Mobil. The writeback was from Gordon at RealCurrents, and he makes a very important point about corporate retirement funding (or the lack thereof) and the whole mindset that seems to pervade American business these days.

The thrust of his observation is that we (Americans) don't seem to like to hold reserves anymore: either we think the rainy day will never come, or we're confident that when it does we can foist our obligations onto others. This leads to spending like there's no tomorrow.

I certainly see this, all around me, every day. Out here on the farm, if we didn't hold reserves we'd soon be broke. Our income only streams in when we sell or trade - there's no such thing as a paycheck. We've gotten to be quite the tightwads: it was a real treat to buy a $20 book from Amazon the other day even though I'm sitting on a healthy five figure bank balance. That's because I realize that the money in the bank today is feed for my cattle and hens and gas in my truck tomorrow - a point a lot of folks don't seem to get anymore. I call it the "paycheck to paycheck" syndrome, and it's bothered me for quite a while now.

I don't do this too often, but since my original post is too old to show up in my current RSS or on the main screen, I wanted to link to Gordon's blog post here. So follow that link: he hits the nail square on the head!

/Politics | 3 writebacks | permanent link

On 5/22/2006 13:51:25
Arwin wrote

JIT is like this

There are two sides to this phenom. The Japanese practice of JIT (Just In Time) or zero inventory is an example of another culture using something similar. I work in manufacturing and I can tell you having to manage JIT is a real pain... but one that may be worth it. The risk: a goof up could be a catastrophe. I think the reason JIT is so successful for the Japanese is the size of their country and the typical co-location of different but related manufacturing plants. Henry Ford was aware of this at the beginning of the 20th century and built the giant River Rouge plant to make the Model T. This plant took raw materials, made its own steel, electricity, and eventually spit out Model T's. But I digress. While I can see the value in JIT, I don't see the long term value in living paycheck to paycheck. I did this when I was fresh out of school, but as I get nearer retirement age the statistics on saving in America scare me. Another business example is waiting to the last minute to pay their bills. For most companies this isn't done because the company is living paycheck to paycheck, but to squeeze the last ounce of time value out of their money. I (and likely many others) do this with credit cards... paying them off every month and holding on to the cash until then. Many businesses take this to the extreme. I pay my bills so I know they will be paid before they are late. I'm not sure businesses do this. Not paying your bills is in my mind unethical... like going back on an oath. Based on what I've read about Heathens in Dave's blog, I'm sure many business practices fly in the face of going back on an oath. Hmmm. I wonder how many small businesses displaying the fish don't honor their oaths?

On 5/23/2006 07:10:58
Bjorngrimnir wrote

Believe it or not, the tendency to live paycheck-to-paycheck, or in many cases to live off of credit, is something that horrifies a lot of Germans, and is one of the things Americans are criticised here for doing. I speak in generalizations here - there are Germans who are taking on more and more credit debt - and as an American, I feel I do a pretty good job at being thrifty. I think the American economy, which is consumer-driven, benefits by a juggernaut effect. Things like credit debt and overspending benefit the economy by keeping it rolling...those who get caught up in living beyond their means pay a greater price than the overall economy does, as casualties caught up in the machinery of a juggernaut. I think that says a lot for the consumer's true value in the American system, and explains why a lower standard of product quality is more easily tolerated - the 'bang' for one's buck isn't for personal gain anymore, it's reserved for propelling the juggernaut. What worries me isn't that people are taking more and more credit debt, or living paycheck-to-paycheck. What worries me is what happens when the American economic juggernaut slams into an even bigger juggernaut. When that happens, and it is only a matter of time, a lot more people will suffer - even those of us who have saved up over the years.

On 11/7/2006 16:02:24
Gordon wrote

Hi Dave, I just found this looking through some other stuff on Technorati. Thanks for the nice comments. It's refreshing to see that someone got what I was writing about; some guy on the Business Week site blasted me saying I didn't know anything about pension funding! Of course, he probably wasn't a farmer, so what would he know... It reminds me of what Steven Covey writes about the "law of the farm", i.e. how real economic value is something that takes time, not just manipulation of perceptions. I'm an engineer, not a farmer, but I've done enough gardening to know some of what you're up against. In general, though, just from your remarks above it's clear you probably think more like a true capitalist than a lot of the MBA types. Part of what I was getting at was that they wouldn't just "spend" like crazy, but rather "invest" like crazy. So many CEOs flush with cash are like teens at the mall, buying who knows what and often wasting their money. The problem is, if the coffers run dry and there's a crisis, they'll surely beat a path to Washington wanting the taxpayers to bail them out, which is why I'm not keen on their "ever-so-smart" MBA approach to leaving us holding the bag.

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MacRaven
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