Day 290 – Adirondack Chairs

Aderondack chairs...the spectacular view is absolutely essential. Cocktails preferred.

          I got interested in matters of finance and economics because I was curious to know what is going on that is making it so difficult for me to find another job. Admittedly I’ve got a few strikes against me in terms of employability—advanced middle age, narrow industry experience, health issues, increasingly inadequate credentials. Still I have a broad base of practical skills, a passable personality (for an accountant), and a modicum of native intelligence. It ought not to be so difficult to find someone who wants to hire me.

The answer to this conundrum, of course, is that no one wants to hire anyone. In spite of a return to earnings and an accumulation of cash reserves among the nation’s businesses, unemployment remains at near record levels. Jobs are not being created. It is a buyers’ market for labor. With too many candidates chasing a relative handful of available positions, any bit of tarnish on a résumé is sufficient to get it tossed out into the darkness where there is weeping and gnashing of teeth.

In other words, even though I have worked myself into irrelevance, and even though, in spite of the irrelevance, I still have some value in a competitive workplace that requires intelligence and creativity, I am at the mercy of externalities. I’m not going to find a job until jobs come back to the American marketplace. I’m beginning to believe that this is not going to happen anytime soon, if at all.

The reasons for this are myriad. As with almost anything problematic, the situation is more complicated than it first appears. It doesn’t make it any easier that so many well-meaning people think they know what’s wrong and how to fix it—all of them with different ideas—while so many others think the problem will fix itself…given enough time. It’s time, I think, to add my own two cents worth.

Big companies, while they may have returned to profitability and while they may be sitting on near record cash reserves, are not adding jobs. The New York Times reported August 8th that revenues increased only 6.9 percent on average for 175 S&P 500 companies reporting 2nd quarter earnings, but profits rocketed up by an astonishing 42.3 percent. The Fed has reported that American companies have stashed an estimated $1.8 trillion in cash reserves, the highest level in nearly 50 years. Harold Meyerson of the Washington Post suggests that none of this will translate into jobs because the American business model is fundamentally changed. They are not adding jobs because they are not seeing growth. Their profits are based on draconian cost cutting measures they took when times were not just bad, but scary. They trimmed jobs, outsourced overseas, cut overhead. Now they are making respectable profits on reduced revenues. They are not going to add jobs until they see growth. Even then they are going to add jobs overseas rather than stateside. It may be un-American, but it will be smart business.

Meanwhile, of course, the remaining employees are doing more work, picking up the slack for their fired compatriots. Anecdotal evidence would suggest they’re not that happy about it, but they have to suck it up because, well, they still have jobs, don’t they? The downside is that morale is sinking, and the incidence of job related health issues is likely on the rise. To me these things are given. I know they will happen sooner or later.

When they do, quality will suffer. Products will come apart at the seams, catch fire unexpectedly, fail. Customer service, becoming more important as product quality declines, will suffer as well. Before you know it another company is on the skids. This can play out in many different ways. Here’s a recent one.

An airline passenger, fed up with being shunted about like a heifer on the way to market and forced to share her personal space with unwashed strangers, decides she needs something out of her bag in the overhead compartment before the plane lands. She decides this even though the captain has turned on the seat belt sign and ordered the crew to prepare for landing. The flight attendant—overworked, underpaid, and tasked with the nearly impossible job of placating passengers who have been getting less and less value for their travel dollar from the airlines for years—attempts to intervene. It's his job to enforce safety standards he didn’t set upon passengers who do not understand or care very much about their importance. Tension brews. Words are exchanged. The passenger slams the overhead compartment door into the flight attendant’s head, leaving a mark.

Eventually the compartment door is closed. The passenger takes her seat. The cabin is prepped for landing. The seat-backs and tray tables are locked in their full upright position. Everyone is strapped in. It’s just another uncomfortable day in the annals of commercial air travel. No one is very happy about it, but what are they going to do…drive? Take the bus? No, passengers and crew alike, they’re all locked into unattractive choices, and they muddle through as best they can because that’s what we humans do...more often than not. I don’t know why. I just know that we put up with an inordinate amount of crap, because we think we have to, right up to the point where we don’t anymore.

Back in the ill-fated commercial airliner, the flight attendant is buckled into his little jump seat contemplating a decades long work history that includes tolerating every kind of rude and abusive behavior that indignant travelers are capable of lavishing upon the primary customer interface of airlines competing on price by cutting costs. He does not paint himself a picture of job satisfaction. He is tired of fading the heat for policies he did not implement, services he did not cut, and seats he did not shrink so he could fit ever-more-ever-less-comfortable passengers into the cabin for which he is responsible.

We all know what happened next. It was just a couple of days ago. The flight attendant, Stephen Slater, got on the plane’s PA system, cursed the abusive passenger, wished everyone else safe travels, deployed the emergency inflatable slide, grabbed a beer from the beverage cart, and slid to freedom. He got arrested later for criminal mischief and reckless endangerment, but his gesture will be forever remembered as one of the single most poignant resignations in the history of disgruntled employees. I wouldn’t be surprised if they make a movie of it. Slater is a hero to millions of overworked, underappreciated, and well abused employees all over the world. Jet Blue, on the other hand, has a PR problem they are not going to be able to shrug off. Jet Blue is on the skids. They just don’t know it yet.

I was talking about jobs, and why I don’t think the economic recovery, such as it is, is going to generate much in the way of new employment opportunities. The other part of the problem, as I see it, lies with small companies—the start-ups, the innovators, the mom and pops with a better mousetrap. Conventional wisdom is that this is the sector where jobs are created. The problem here is that these companies have not returned to profitability. If they existed before the storm, they didn’t have the resources to survive. After the storm, they can’t get the financing to either start or re-start. The banks won’t loan them any money, even though the banks can borrow money from the Fed for free, even though the banks are making record profits, even thought the banks have been bailed out by the federal government, even though the banks have been able to pay hefty bonuses and dividends.

This is because the banks are still loaded up with toxic assets. They still have untold billions of dollars of unrealized losses tucked away in the creases of their balance sheets that they are loathe to disclose. The government that bailed them out is loathe to disclose them as well, as are the audit firms that have for years been blessing the inflated valuations that the banks have put on these assets. Knowing this cancer exists, the banks are afraid to take a flyer on innovation. They are not about to loan money to a start-up and risk another default in their portfolio when they can generate just as much, probably more, profit from fees and usurious interest rates on debit and credit cards. Meanwhile employment lags for lack of start-up capital and funding for product innovation.

We all suffer for this. It’s not a new thing either. It was just hidden before—covered up by the huge bubble in housing prices and real estate speculation. In an excellent article in The Atlantic, titled “How a New Jobless Era Will Transform America,” Don Peck cites economists Edmund Phelps and Leo Tilman, who argue in The Harvard Business Review that “…dynamism in the U.S. has actually been in decline for a decade…[due, among other reasons] not least, [to] a financial industry that for a generation has focused its talent and resources not on funding business innovation, but on proprietary trading, regulatory arbitrage, and arcane financial engineering.”

Regulatory arbitrage and arcane financial engineering are nice generic terms. In their more specific and perhaps better known form they refer to Repo105 transactions and derivatives like credit default swaps. The latter crashed our financial system. The former helped hide the mess. The banking industry has been fleecing America for years, and now they are unable to help us crawl out of the smoking ruins they created because they bought their own swill.

They were so successful for so long at the fleecing that they began to believe their own lies, and that’s when they started fleecing each other. It wasn’t gambling really. All the time they knew that the government would bail them out. How did they know that? They kept cycling their best and brightest into Washington to make policy and emasculate regulation. Bob Rubin and Hank Paulson are the most egregious examples of the lot.

So as a nation we are at least 10 years behind in value-adding innovation. To me this represents 10 years of lost job creation potential. We’ve got a hell of a lot of catching up to do, but we apparently don’t have the money to do it. Republicans are trying to stymie any progress in the name of fiscal responsibility. Democrats are trying to stimulate votes with good money after bad. Meanwhile the same bad actors who got us into this mess—the thieving bankers—are still driving the bus, still hiding their problems, still avoiding any meaningful financial regulation, and still too big to fail. This is why the recovery, such as it is, will not create any jobs.

We all face trade-offs every day. This is especially true, I think, in our work. We expect to have to do things we don’t care for in order to get things we do care for. It might be just money, but for most of us, if you would believe the surveys occasionally by the media, there is more to job satisfaction than just a competitive salary. Most of us want to feel that we are making some kind of contribution, that our efforts are appreciated, that we count for something, that we have added value to the equation.

To me work is kind of like an adirondack chair. Adirondack chairs are almost always positioned to take advantage of a spectacular view. Personally I have never seen one that wasn’t facing water. Without the view I would never sit in one. They are difficult to get into and out of, and they are not very comfortable when you are seated. But, if the view is sufficiently interesting, if you are seated next to someone companionable, if someone is bringing you another cocktail when your glass gets empty, then a little discomfort is a reasonable trade-off, and an adirondack chair makes perfect sense.

Jobs are like that too. Being an airline flight attendant can’t be a very attractive proposition if you only consider the work. The day-to-day activities of flight attendants are in large measure identical to those of wait staff. Worse than that because they don’t get tips, and they have to bus their own tables. The only reason anyone would ever want to be a flight attendant is for the travel opportunities. You can put up with a certain amount of abuse and bad attitude if you occasionally get to visit Paris or Rome or the Carribbean for example. But, if you find yourself with a gash on your head on a flight full of schmucks from Pittsburgh to Kennedy International, you have to consider that the plus side of your tolerance equation has shriveled up to ‘just not worth it.’ That’s the point where you have to get out of the chair and find something else to do. No one is bringing you a cocktail, so just grab a beer on your way out.