Getting fired and the US financial crisis!

Last week, one of my colleague got fired. He got fired due to non-performance rather than the huge financial turmoil that has been happening lately in the US. He was a very good friend of mine and we spent a lot of time talking about soccer (he was from Europe) and in general were on very good terms professionally too. He came down early in the morning, like he usually does but was promptly walked out of the door by his manager. It was a shock to him, as it was for everyone else, including me. This was the first time I saw anyone getting fired, and it shook me for that day. I called up one of my good friends and my conversation went on the lines of ‘I might not see him ever again, he is as good as, if not exactly, dead to me’ – not exactly sentimental or sympathetic but close to it but that was that. Life continued on the same enthusiastic tone from next day onwards.

Over the last week, however, hundreds have been fired. Over the next 6 months or so, many more will be. Lehmann, AIG, Washington Mutual, Wachovia – its almost like the who’s who of US financial services. Quite a few of my friends work in many of these companies and many of them and their colleagues have got fired. Other than the usual friend bonding-sympathy, I felt no particular remorse that these giants were going down nor that people in these companies were getting fired. Was it the feeling that these companies deserved to be punished that made me feel non-remorseful/not shocking? Maybe so. But there was another reason.

I believe in Capitalism (more libertarian than capitalist, but for simplicity purposes, let’s stick to capitalism). Whether I like the Darwinian capitalism of the West, state-sponsored capitalism of Europe or the neo-Confucian capitalism of the East is anybody’s guess. Capitalism drives efficiency, promotes markets, promotes level-playing field and in general, is an accepted form of generating value for a long time, for the greatest number of people.

I think that’s the precise reason why the United States is the hotbed of capitalism, entrepreneurship, innovation and in general, the destination market for almost every company in the world. Resources get allocated to the highest bidder or the brightest idea. Money is not a consideration as long as your idea can work, or you have the right skill sets. Markets (and by extension, Wisdom of the Crowds) determine whether you/your idea are successful or not. Markets determine your profits and in an ideal, capitalistic society, Markets should indeed determine your losses.

The last point precisely pissed me off during the last week. Failure of the basic tenet of capitalism. All the who’s who of US financial service companies made truckloads of money over the past few years, over seemingly intricate financial products, only understood by a few. These companies were champions of the market, proclaiming how good the Wisdom of the Crowds was. However, when it was time to recoup the losses, they criticized the market for short-selling (which simply means that the market has lost confidence in these companies and hence will eventually lead to a downturn in their share prices) and shamelessly begged the Government to bail them out. And, the stupid Government did.

Communism is another concept, wherein the resources are taken from the rich and are given to the poor, thereby creating a sense of equality. What has happened in the US over the last week, is Reverse Communism – taking from the poor (in the form of taxes which inevitably have to be raised over the next few years, in the form of less development due to resources deployed to bail these companies out, increased cost of borrowing due to a screwed up financial economy etc etc). Heard of double standards? Capitalism on the way up and Reverse Communism on the way down – thereby making hay whether the sun shines or not. Well, I would love to be on such a party, if I was not paying for it. But, the tragic part is, that I will – atleast in the form of increased taxes. When the shit hit the fan in Wallstreet, all the walls in US homes got colored.

It is not the huge profits that these companies raked that pissed me off, it is not that the Government has bailed them out that has pissed me off, but the very concept of privatizing wealth and socializing debt is what that has made me angry, frustrated and when I hear such things as AIG getting sold at $1.5 a share and Lehmann close to zero, I experience immense schadenfreude – and if that makes me a sadist – so I am.

P.S – On my other blog Framework for Increased Profits – An Understanding


3 comments so far

  1. Procrastinx on

    The problem with free markets is that they are ruthless towards failure. Its hard to get a second chance if you have failed.
    Communism (or the basic principles of it), reverse or not works well in a crisis situation. Agree or not but this is true. People do voluntarily donate money for crisis and since the scale of the crisis is bigger and more complex, the government had to step in and bail out these companies because it could not afford a situation wherein there are thousands of unemployed people — is too much of a volatile situation.

  2. Kiran on

    @Procrastinx – I agree to the point of ‘help in the moment of crisis’ logic – but only for nature crisis like Hurricane Katrina or Hurricane Ike. I don’t think anyone would question any amount of money spent on such crisis. A man-made crisis such as this has to be dealt ruthlessly, else it would set a bad example for generations.
    Secondly, taking your logic to an extreme, if I set up a company, employ say 5000 ppl and then drive the company bankrupt – the Govt. should step in, save my company and give me approx $50 million for me to resign – is that what you were hinting at? 🙂

  3. cxggroup on

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