Why is "Bad Economy" becoming an all purpose excuse

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Permalink Reply by John on November 11, 2008 at 6:29pm

I agree with you about 'bad economy' becoming an excuse. This is especially prevalent amongst tech startups right now. Instead of saying 'we built someone no one wanted' or 'we blew through tons of money without establishing a competitive foothold,' it's far easier to say 'we were on our way to a huge success but the recession got in the way.'

I think the most important reason companies say this is that people believe it. That is, it works.

For egotistical people, it saves face. For future business partners and investors, it makes the next deal easier to do.

Until people are called on it publicly, they will continue using it. Good thing is the Internet is making it easier for information (and the truth) to be shared.

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Permalink Reply by Laurence A. Lee on November 12, 2008 at 11:02am

My understanding is that GGP is heavily vested in Real Estate.

With current economic conditions, the estimated value of GGP's Real Estate Holdings has gone down -- less equity to borrow against, which makes it difficult for them to renegotiate or refinance their $1 billion loan and another $3 billion loan that are due soon.

We also have a Credit Crunch -- banks just aren't as willing to lend because they're already overwhelmed in Bad or Risky Debts (mortgages that are at high risk of defaults). The $700 billion bailout plan is supposed to ease the Credit Crunch: Government will buy those risky mortgages from Banks, thus Banks will have more Cash available to lend out.

The Credit Crunch is bad for business (my startup included), because without the ability to borrow or refinance, no capital is available for them to make investments.


As a business owner, I believe Bad Economic Conditions is a valid reason for cost-cutting. Would you buy a Porsche today, or keep that expensive Cell-Phone plan, if you knew you're going to get a Pay Cut or Laid-off in the next 6 months?

Business owners need to make decisions like that in order to survive.

Mass Layoffs are never a pleasant experience. I've been part of a few Layoffs when the Dot-Com bubble burst. Unfortunately, if there's no good forecast of Paid Work To Do, the business has little choice but to let the workers go. It's nothing personal, and I disagree with the average Hawaii worker's tendency to make it personal.

While there are businesses in the Headlines who are blaming the Bad Economy to cover up severe mismanagement (AIG, anyone?), not all businesses are like that at all.

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Permalink Reply by Laurence A. Lee on November 12, 2008 at 1:59pm

Whoops, spoke too soon -- looks like Paulson is renegging on the original intent of the Bailout Bill. Ugh.

http://www.chron.com/disp/story.mpl/ap/business/6109109.html

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Permalink Reply by Cameron Souza on November 12, 2008 at 6:00pm

I agree. One positive thing about the current climate is that it will weed out the bad companies that made use of easy money and cheap risk to prop up bad ideas and/or poor execution.

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Permalink Reply by Jared I. Kuroiwa on November 13, 2008 at 2:06am

The sad thing is that some good companies (and startups) will fail also. The financial side is really going to hurt as companies won't be able to get capital to keep afloat if they aren't already overleveraged from the optimistic, high flying days that weren't really that long ago.

Another thing that is scary is how companies will react in these times as easy capital dries up and personal spending drops due to the lay-offs that have only started. And in that vein, as more federal money is needed to support the burgeoning unemployed. Companies fighting for survival can be like cornered animals...

In a good economy, some companies could restructure and survive. But in a bad economy, there is no time and there is no net (especially now).

If only the bad economic sweep took out the "bad companies"...

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