Achieving Business Success
By Robert L. Bailey
Don't criticize your competitors. Thank them. Competition is the best thing that can happen to any type of business. It keeps us on our toes. It makes life challenging and interesting. Competition helps us find new ways of serving customers; it helps us find ways to reduce our overhead costs and reduce prices; it gives us reason to continually search for ways to serve every customer better. Without competition, business wouldn't be half the fun. Without competition, most companies would be too obese to waddle.
This is why most people who work for government agencies aren't overly inspiring or enthusiastic. Without competition there is little reason for them to bust their buns to serve customers. They know that customers will return – they have no place else to go.
You have noted that football teams that are strongly favored to win over a competing team often play their poorest for the season. There is no reason to work hard – they know they're going to win anyway. Similarly, a football team playing the top team in the conference will play its best game of the season. Tough competition is good for all of us.
Competition and the free enterprise system are two factors that make America especially great.
Yet too often we find that the health of our competitive free enterprise system is being threatened by well intentioned but ill-informed politicians. Corporate leaders choose states in which to locate based on the business climate – favorable tax rates, regulatory environments, work force and political attitudes, quality of life issues, and less onerous laws. In most cases, the states with the most favorable business climate and lowest tax rates generate more tax revenues and create more jobs. Yet many politicians don't get it.
You may remember the so-called 1990 luxury tax on boats priced at more than $100,000. As it turned out, rich people needed boats a lot less than employees who build them needed jobs. They stopped buying and dozens of boat companies went out of business.
A few years ago California electric companies experienced financial difficulties because of government bungling. Wholesale prices of electricity were deregulated but retail prices were capped. No company can exist with such constraints for very long.
History is filled with similar examples. Taxes were imposed on glass in England in 1745. As a result, glass manufacturers moved to Ireland . In 1796 a tax was levied on windows, and that tax was increased ten times over the next 50 years – because windows in houses were symbols of the rich. To avoid the tax, people started bricking up all but one or two windows in their homes. The glass tax was repealed in 1845.
There are rent controls in 150 cities in our country. Landlords won't fix broken windows or hot water heaters to encourage tenants to move so they can increase rents. This has created jungles of slum lords.
In my former industry, property and casualty insurance, many price freezes and rate rollbacks have been dictated by legislators, while underlying costs for auto and home repairs, medical bills, law suits and legal bills kept rising. There have been excess profits laws calling for "negative profits." I always called that a loss. In every case, markets constricted and healthy competition declined.
And the list goes on. Banks are often required to lend money to people without regard to their ability to repay. Who pays the bill in the long run? The responsible customers of the bank. Telephone, gas and electric companies are required to continue service to indigent customers who never intend to pay for those services.
In one state, to obtain a permit to open a business, many months and thousands of dollars must be expended dealing with 72 government agencies.
These kinds of government constraints can occur in any industry – including yours.
But there's something you can do about it. Always defend every aspect of the free enterprise system. Right now we don't do a very good job of it. Even great leaders tend not to be heard because they are working 70 or 80 hours a week to meet payroll and make their businesses successful. They don't have time to posture before the TV cameras, and it's not their nature to do so anyway. They just keep their heads down, work their tails off, and pay their taxes, while the politicians bash them and their businesses.
Most business people I talk to have become cynical about our nation's politicians, and for good reason. Yet our system of government is the best in the world. We have to make it work better – and we can have influence.
If a legislator receives 50 letters on a given issue that appear to be spontaneous and not an organized effort of a special interest group, he or she believes there is a groundswell of public opinion. So write letters. You can have an impact on unfavorable legislation.
Several years ago my wife and I traveled to China where I wrote down the guiding principles of the Chinese Communist Party:
I don't know how they define sufficient, adequate, secure and decent , but the words don't mean what you and I think they mean in this country. No doubt about it, we live in the finest country in the world.
But we have a job to do. Business people have to get more involved in government. We must get personally acquainted with our legislators on a state and federal basis. When they don't support our views, we have to let them know. If they don't listen, we have to select different ones in the next election. This may cost us a few bucks each year, but it may be one of the best investments we can make to keep our businesses healthy. We can't rely on our trade associations and chambers of commerce to do it for us. We have to do it.
Competition? Don't worry about it. Instead work to keep the free enterprise system healthy and free.