What’s a Good Employee Worth?

This post offers commentary on an interesting story out of Germany that has apparently captured the German public’s imagination.  It’s become a big story against the backdrop of an upcoming German election.  Here’s the link to the full story.  For those that don’t click the link for additional background, here’s the summary:

• A Berlin cashier who has worked for a supermarket for 31 years was recently fired.
• The reason given for the firing was that she withheld/stole $1.65 worth of bottle receipts.
• The cashier denies the charges.
• Politicians for both parties are commenting on the issue, and the case has “drawn extensive television and print media coverage.”

I don’t know whether she stole the money or not (no one made the security cameras available to me).  But I know that I was appalled by the following comment coming from a leading politician: “Horst Seehofer, leader of the Christian Social Union, said the case raised questions about capitalism, which has come under attack in Germany in the wake of the global financial crisis.  ‘I don’t understand how a cashier can be fired because of 1.30 euros while managers who lose billions of euros can keep their jobs,’ Seehofer told a rally in Bavaria on Wednesday.”

Well I have a few thoughts for Mr. Seehofer.  First, the managers who lost billions of euros may be guilty of mismanagement, bad judgment, poor business sense, weak leadership…any number of things.  But terrible performance is not the same as stealing, it is not the same as fraud, and it is not the same as dishonesty.  If the cashier did actually intentionally, willfully steal, then we’re talking about something fundamentally different than losing money.  This, in no way completely exonerates managers whose bad judgment costs shareholders (and taxpayers) money.  But Mr. Seehofer makes a profound error in pretending that bad business decisions are morally equivalent to the conscious choice to steal.   

Second, this firing should absolutely not raise questions about capitalism.  Almost any time someone loses his/her job, it is a sad thing.  No dispute there.  But of all the systems devised by man, none has a better automatic check/balance to protect individual workers than capitalism.  I’ll repeat that one more time, this time in the positive rather than the non-negative: capitalism is the best possible economic arrangement to protect labor because it has an automatic check/balance.  What is that check and balance?  It is this: if managers and owners expect to be rewarded for strong company performance, they have every incentive to keep the best possible employee in every position for the price (salary) they are willing and able to pay.  Similarly workers are absolutely free, if they believe they are underpaid, underappreciated, or underutilized  to seek employment elsewhere.  The free market lets labor’s price get set by supply and demand.  It is not only efficient…it is moral.  Does this mean that there are never any “unfair” firings?  Clearly there are.  Managers may have vendettas.  There may be personal conflicts.  Any number of things may occur which lead to companies and individuals going their separate ways.  But when a manager dismisses an employee who is highly qualified and appropriately paid, then the market ultimately punishes that manager.  He/she experiences:

• Lost productivity until someone new is hired
• The actual costs of finding and hiring someone
• Uncertainty associated with replacing a known skill-set with an unknown one
• “Getting-up-to-speed” time during which the new employee learns the ropes
• The possibility of having to pay a higher wage for the same skill set

This brings me back to the case of our cashier.  If she’s a great employee and if she didn’t steal, her employer has no incentive to unfairly terminate her.  It is a sad fact of capitalism that sometimes in order to maintain viability and/or preserve profits, companies do sometimes need to fire people.  But it is that very dynamism that enables capitalism to create new jobs as well.  It is also the flexibility to fire, that gives capitalists the freedom to hire easily too.  Greenspan’s said it before, and it’s logical too. 

Want to see what happens when you can’t fire?  Remember the riots in that rocked France a few years ago?  That audaciously capitalistic stronghold tried to actually pass a law letting employers fire young employees, at will, during their first two years on the job.  So, without that law, employers who hired had to keep  their employees for two years.  What a surprise that the Under-25 unemployment rate in France was hovering at 22%.  If that’s morality, I want no part of it.  If I’m a good worker, I’ll take the free market every time.

What Do Gold and Washed Up Athletes Have in Common?

Gold has always perplexed me.  Throughout history, and I mean LONG HISTORY in this case, it has remained a storehouse of value/worth.  During troubling economic times, people flock to gold.  Right now, it’s trading at approximately $1,000 an ounce.  Let’s ponder that for a moment…$1,000 an ounce.   I can buy 500 gallons of gas, enough to drive my car for more than six months, for the same price as one little bitty ounce of gold.  Gold is pretty.  It is shiny.  I like it.  But as a storehouse of value, I believe it survives solely on its reputation.  Gold is a has-been in reality, but its reputation keeps it forever young. 

Economists will tell us that price is a function of supply and demand.  Okay, so the supply of gold only grows as gold is mined.  Fine.  Demand, on the other hand, has clearly gone up dramatically resulting in the price going up.  This begs the question: is gold suddenly much more useful than various other currencies, instruments, or commodities?  I say no.  Unlike a dollar bill (or 20 dollar bills), I can’t generally walk into a store and drop a gold ducat on the counter to buy groceries.  Unlike a share of stock, gold itself does not entitle me to a share of a company and/or a distribution of profits.   And unlike a barrel of oil, it can’t be refined and put in my car as good ol’ gasoline.  I won’t go so far as to say gold has no practical purpose.  It clearly did in history, and right now, it’s certainly good for, say, a wedding band (though I’d be no less in love with my wife with or without the gold band).  But for practical purposes, let’s be honest… gold is, uh, not that useful. 

But people are bidding the price up.  So clearly people feel gold has value, which brings me full-circle back to my ultimate point about gold’s worth.  Gold survives on its reputation alone.  It is truly amazing.  It just goes to show that as long as everyone agrees that something should represent purchasing power or value, then it does, even if its practical value is effectively nil.  A sheet of pale green construction paper is worth little.  But a combination of paper fibers, imprints, etc. with a pale green hue is called “legal tender” and instantly has value because, well, because others agree it does too.   Same concept for gold, ultimately.

I’ll close with this thought:  I wonder what would happen if some little kid (metaphorically) came along and yelled “The Emperor has no clothes!” with respect to gold.   What would happen if the whole world suddenly realized that gold only has value because we know the next guy over believes it has “intrinsic” value?  Clearly it would radically decline in price.  Even housing has true intrinsic value as long as people need shelter.  A Coke machine on the edge of a desert has high intrinsic value.  Gold…it’s the has-been athlete whose reputation has outlasted his usefulness.  There’s always a general manager to sign him to a big contract.  Except that the athlete’s skills DO decline over time, while gold’s reputation isn’t going anywhere anytime soon, no matter how little practical use it actually has.

Booze, Convenience, and Consumer Choice

I’m generally not a big wine drinker, but somewhere along the way, I signed up for an e-mail distribution from a local wine store.  In the last few days, the store sent an e-mail to its distribution list urging  readers to read what appears on the TWSRA (Tennessee Wine & Spirits Retailers Association) web page and take action.  Specifically, we were being asked to contact state legislators to urge rejection of a bill that would allow wines to be sold in grocery stores and convenience stores in Tennessee; currently these are only sold in wine/liquor stores.  I found some of the claims very interesting. 

• “Hurts small businesses. All of Tennessee’s 525+ alcohol retail stores are small businesses owned by Tennessee residents.” 

As a small business owner, I like the concept of helping small businesses.  But not at the expense of customer choice and certainly not via a government mandate.  Wine/liquor stores can compete on any number of things including selection, staff expertise and recommendations, and potentially even price on certain items.  On convenience, they’ll likely lose with once-every-so-often drinkers like me.  But either they can compete and win on their value-adds, or they can’t.  Can it really be argued that consumers are benefiting by these small businesses if the store’s owners believe a government-protection approach is needed for them to stay in business?

• “Means fewer jobs. Tennessee’s alcohol retail stores employ more than 3,000 men and women who hold special permits from the state authorizing them to distribute alcohol. This legislation would jeopardize the jobs of these people, many who have devoted their careers to the responsible sale of alcohol. Those jobs would not be replaced by convenience and grocery stores which already employ staff to sell their array of goods.”

I like jobs.  It’s good when people are employed.  But the last sentence of that bullet is very telling… “[The lost jobs of wine/liquor store employees] would not be repleaced by convenience and grocery stores which already employ staff to sell their array of goods.”  I’ll attempt to put it differently: a given product could still be sold to the public with a lower cost of labor input.  So here’s the question: are the wine and liquor store employees adding value or not?  Any government mandate can create jobs.  Here’s one that we could try: we should outlaw self-service gas pumps because they take jobs away from gas station attendants.  Here’s another: all elevators should require an elevator operator.  Are these examples farfetched or do they parallel the case being made here for the wine/liquor store employees?  Creating or preserving jobs should not be an end unto itself for governments.  A job is only worthwhile to the degree it adds value in the marketplace.  If the wine/liquor store employees are adding value, then consumers will reward them with business. 

• “Sends profits to out-of-state businesses. This legislation would take business away from small Tennessee stores and turn it over to mega corporations like Wal-mart, Kroger and Publix, all headquartered out of state. “

It is interesting that the wine/liquor stores have so little confidence in their ability to competitively retain customers that they automatically assume their profits will take a hit.  I think they are right that it will, but imposing what amounts to a “convenience tariff” on consumers isn’t the right answer.  Incidentally, as far as out-of-state companies profiting, Publix, Kroger, and Wal-Mart are publicly traded companies, so Tennesseans investing in their stocks can profit by this too. 

• “Motive is money, not public interest. The grocery and convenience store industry says it’s backing this legislation to make life easier on Tennesseans. It doesn’t mention how much it stands to profit. At a time when the industry is feeling a financial pinch, it wants to use alcohol to push sales – at the cost of regulation and control.”

I admit, I actually laughed out loud when I read this bullet.  The fact that the wine/liquor stores, who have enjoyed decades of state-enforced non-competition from grocery stores, impugn the grocery stores for having money as their motive rather than public interest is actually hysterical.  Yeah, money’s the motive and it’s a pretty good one too.  I suspect money might have just a little bit to do with the TWSRA’s lobbying efforts too.

Here are a few final thoughts for my friends at the TWSRA: you just might find that there are benefits for you IF you are good at what you do.  Consumers like me might actually start buying wine more regularly if it is available at grocery stores.  We might find that sometimes we want/need recommendations from experts.  If you’re adding value to the equation, customers will still be drawn to you.  Or here’s another idea: since the convenience stores and groceries are entering your stronghold by selling wine, perhaps you could fight fire with fire and go into the unregulated grocery business and compete with them on their turf (that’s actually a joke).  Just do us all a favor and quit pretending that you are somehow holier-than-thou and your cause isn’t all about money too.  If you’re adding value, I’ll buy wine from you.  If not, I’ll get my wine when I’m already stopping for groceries, thank you.

Good News: The BEST Is Yet To Come

Good news: the best is yet to come for the United States.  And I mean it.  I watched / read the information at “Worst is Yet to Come”: Americans’ Standard of Living Permanently Changed and let’s just say that I respectfully, vehemently disagree with the headline’s premise.  In the link, you’ll see Howard Davidowitz say that:

• Things are really bad…I agree with that
• Americans are responding by spending less, and on specific needs rather than aspirational purposes…I agree with that

But a permanent change in the standard of living…I think not.  Companies and consumers are pulling back, yes, but this is simply an ugly trough in a business cycle.  We will come back up.  A combination of loose monetary policy and fiscal stimulus may help, but most importantly, the natural business cycle will do its part. 

Overleveraged companies will go out of business.  Dinosaur companies may go away.  Schumpeter’s creative destruction will take its toll.  But other companies with great balance sheets and vision will use this opportunity to innovate on their own.  Or they’ll buy smaller companies with innovative technology, and they’ll race to leverage it.  And somewhere out there as I type this, there are inventors and entrepreneurs with passion and vision, and they will reap enormous profits when their game-changers spring to life.  Somewhere out there, there are laid off individuals whose talent had been wasting away in a bureaucracy.  They might never have left the perceived security of a large corporation on their own, but now they’ll take on the challenge of unemployment by following their passions and creating something fabulous.  Some will fail, but some will sow the seeds of the next great wave of growth.  

In ’73-’74, the S&P went through a horrendous period.  Inflation was ugly, to the point that President Ford resorted to wearing a Whip Inflation Now button.  Then came the Carter “malaise” including the so-called misery index and stagflation.  Then in the early ’80s, Volcker broke the back of inflation by tightening the money supply, but the cost of doing so was the brutal, deep ’81-’82 recession.  Many figured that the death knell of the free market was tolling.  But no, instead we witnessed a growth resurgence in America.  Well-run large companies prospered and a new wave of small companies became behemoths over time.  Innovation flourished ushering in the personal computer age followed shortly thereafter by the web. 

No, we simply won’t be down forever.  The beauty of a market economy is that it is based on the human spirit which always craves something better.  Clever investment and innovation today will be rewarded.  It will pave the way for the next stage of growth.  And we will all benefit.  Our standard of living will be improved by things we can’t even conceive of.  Twenty years ago, I couldn’t have imagined I’d be tapping this out on a laptop (what’s a laptop?), communicating to you via a blog (what’s a blog?), and publicizing my new entry via a social network (what’s a social network?).  Twenty years ago, those things would have basically been a pipe dream, but incredible vision made them a reality.  Those kinds of visions will continue wherever the human mind and human spirit are active, and we’ll all benefit from it.  

So we might not recover instantly, but recover we will.  I guarantee it!  Our standard of living will rise to still higher heights, and our best days remain in front of us.  The BEST is yet to come!

Welcome to Well Worth It!

Welcome to Well Worth It.  I’m glad you’ve found your way here.  In short, this blog will explore the topic of “What It’s Worth”.  The “It” being discussed on any given entry will vary.  Over the last 12 months, as I’ve watched various assets (oil, homes, the dollar, etc.) and their perceived or real worth whipsaw, it became obvious to me that worth:

• Is certainly not always static
• Is not always easily just defined by price
• Is not always reflective of a common value
• Always has the potential to be interesting. 

Furthermore, worth is not the exclusive domain of assets.  We assign worth to all kinds of things including our time, our values, our jobs, our families, and how we deal with the tradeoffs in all of these areas.  So Well Worth It will end up touching on politics, on economics, on philosophy, on history, on workplace, on books and magazines, on family, on sports, and more.  In short, lots of things that I find exciting. 

I don’t expect that you’ll always agree with me, but I hope you’ll at least find it interesting enough to visit regularly, to read my posts, and to comment as well.  I love a good dialogue!

Just so you know a little bit about me, the author, here’s my story:

• I’m a husband, father, son, and brother
• I live in Memphis, TN
• I co-own a store called Shara’s Paperie
• I work for a company called Acxiom (though the views expressed on this blog do not represent and should not be interpreted to represent views of Acxiom Corporation…they are mine and mine alone)
• Here’s more background about me on LinkedIn