Archive for January 11th, 2009

Watching the Sunday-morning talk shows…

In order for Obama to sell his stimulus plan he’s considering extending tax breaks to small businesses. It’s a concession to Republicans who continue to hold onto the classic Regan-era trickle-down economic theory: Reduce the taxes on small businesses and they’ll hire more people.

I don’t buy it. I’ve owned and helped manage a number of small and medium-sized businesses over the last 30 years, which gives me at least some real-world credibility in that domain. So what would I do if my company received a tax break from the federal government? In this economy, hiring new employees would be one of the last things on my list. At the top of that list would be (a) keeping the cash to strengthen my balance sheet in order to be better prepared for worse times ahead, and (b) taking the money out of the company to replace lost personal income and savings from the 40% drop in the financial markets. If my business is dropping off like everyone else’s, I certainly don’t want to increase my payroll with people who won’t have anything to do.

When times are good, all business (large and small) will expand in advance of demand. You see the potential (where that hockey puck is going to be) and you build towards it. But when the future looks bleak, you turn to survival. You cut back. You hoard cash. You wait for signs of increased demand, and only then do you invest in the growth of your business. In particular, no matter how much extra cash you may have, you never increase capacity when the volume of sales is forecast to drop.

Look at the auto industry. Detroit is in trouble, and they ask the feds for loans. But there are acres and acres of car lots with unsold inventory and the manufacturers are shutting down factories and laying off workers, trying to scale back to match the lack of demand for their products. What will the automakers do with additional cash? They certainly won’t hire more people. Why would they want to build even more cars when they can’t sell the ones they’re already making? Do we want the government to subsidize the building of cars that no one wants in the same way as we subsidize farmers to grow crops that have no buyers? (Don’t get me started on that one!)

In good times all businesses, large and small, will invest in their future opportunities. But in times like these the only thing that will causes business to expand and therefore hire, is more orders and more customers. And that, by definition, is a bottom-up process. I understand that Obama may need to include tax breaks for small businesses to appease the conservatives (as much as $200 billion, I’ve head), but I’m sorry to see it.

Getting a logo for SpokenWord.org via a contest on 99designs.com was quite an interesting experience. We offered a prize of $275 and received well over 100 proposed designs from perhaps 20-30 designers. The quality was better than I expected, and the choice was difficult. To make my life easier (or so I thought!) I posted a short questionnaire on SurveyMonkey.com and invited members of our team as well as all of The Conversations Network’s registered members for their opinions. It was on short (24hrs) notice, but we got more than 100 survey responses.

My first surprise was that the opinions were all over map. There was virtually no consistency. Maybe one or two designs were disliked by all, but the respondents’ first, second and third choices were evenly distributed across the others.

The second surprise was the number of angry messages (some *very* angry) about the whole idea of holding a contest at all. Little did I know what a can of worms I had opened. The gist of the complaints is that designers should not be asked to submit designs on spec; that any good designer should be paid for their work. One email referred to a web site that specifically trashed 99designs.com. One one hand, I see their point. OTOH, there are many professions in which ‘spec’ creations are the norm. Consider musicians and fine artists, for example. Or real estate developers. Hey — entrepreneurship and the entire venture-backed world is all about speculation and taking risks. Yes, there are commissioned-work oppotunities for artists and some houses are built-to-order, but they’re the exception in those businesses. I could have tracked down a designer and reviewed their portfolios. In fact, most of the previous logos for The Conversations Network were created by Dorothy Yamamoto, who is now retired. But I decided to give the 99designs.com site a try this time, and I’m glad I did.

The winning designer (‘mithrill’ — I don’t know if he wants his real identity to be published) got in touch immediately after the contest. We communicated via IM and we collaborated on a few minor adjustments. Within two hours after the contest, he had sent me the files, palettes, etc. Very professional. Next step is to integrate his logo and the color palette into the SpokenWord.org alpha site. Then onto a complete site design for the public beta launch for which I intend to return to 99designs.com. My flak jacket straps are cinched. I’m ready for the attack.