2012 and the Local Economy

I was privileged to be surveyed late last week by the Herald-Leader’s Tom Eblen for today’s column on the state of Lexington’s economy for 2012.

I don’t envy Tom: distilling the often-disparate views of eight different business owners into 800 words or less must be tough.  (As regular readers might imagine, my views didn’t exactly align with many of my peers.)

My response alone was over 1000 words, so the understandable – and necessary – result was that some context was stripped from my comments.

Still, Tom asked very thoughtful questions, and I liked some of my answers.  So I thought it might be worthwhile to share them here on CivilMechanics.

And if you haven’t read Tom’s column, go check it out here.

(Note: I wrote these answers early Friday morning.  Some local events have already outdated at least one answer…)

1. Are you optimistic or pessimistic about the economy this year. Why?

I’m kind of bipolar on the economy.  For the first time in 4 years, I’m seeing signs of strength in our business, in our customers and their ability to buy our services, and in the national economy.

At the same time, I see two major “storms” on the horizon: the apparent willingness of Republicans in Congress to scuttle the economy for political advantage (and I don’t think this is a “both sides” thing – see this, for example), and the apparent unwillingness (or inability) of Europe to deal effectively with their debt crisis.

In my view, both storms are fueled by wrong-headed drives for austerity – forcing governments to spend less when no one else is spending, and further drying up demand.

2. How is your business doing?  How are business conditions better or worse for you than they were a year ago?

Our business is still weaker than I’d like in the wake of the recession, but it is growing.  Sales are up about 3% over last year, but some of the underlying fundamentals still aren’t where they need to be. While we’ve seen some improvement, many of our customers are still delaying basic maintenance on their cars because they can’t afford it.

3. What’s your biggest business concern for the coming year?

I’ve hired two new technicians in the last 9 months, including one last week, bringing us to six mechanics in total.  Having more technicians will help us enormously in the busy spring and summer months.  But the winter is typically our slowest time of the year, so bringing on an additional employee now is a bit of a risk: Will there be enough work to keep everyone busy and happy? Will there be enough business for me to make a profit while paying them?

Getting through the next few months with a bigger staff is my biggest current concern.  Keeping them busy throughout the year by bringing customers through the door is my biggest concern for 2012.

4. What do you see as your biggest opportunity for the year?

Having a larger staff will allow us to serve more customers more quickly.  Toward the end of 2011, we were frequently scheduling appointments up to a week in advance because we were too busy to get customers into the shop sooner, and we lost some business because we couldn’t get them in right away.  We want to improve our service and accommodate our customers more quickly in 2012, and the additional employees will help us with that.

5. What would you like to see the president and/or Congress do to improve the economy?

I’d like to see another massive stimulus package.


While it may not be popular with your readers, there is no doubt that the early 2009 stimulus worked.  (See chart of private-sector job losses and gains at right, stolen from the estimable Steve Benen.)  We were losing hundreds of thousands of jobs every month and the economy was imploding.  Immediately after the stimulus, the economy stabilized and the jobs losses dropped dramatically, and jobs have been growing slowly and steadily since early 2010.  But a stable and slow-growing economy isn’t enough.  I’d like to see another stimulus to help jump-start a more dynamic, fast-growing economy.

A lot of folks will say that we need to cut taxes and regulation in order to get the economy growing again.  That’s a head-scratcher for me.  Lowering my taxes and putting a little extra money in my pocket won’t help me create a job.  Neither would letting me pollute more.

I’ve hired two new employees in the last year (growing 25% from 8 employees to 10), and the decision to hire them was driven by customer demand for faster and better service – which had nothing to do with my taxes or regulations.  Customer demand drives hiring; giving business owners extra money or convenience really doesn’t.

I like President Obama’s American Jobs Act as a starting point for a stimulus – investment in infrastructure, schools, and public safety is a sound way to grow economic demand.  But I’d like to see even more investment in other areas, such as energy research and American manufacturing, and I’d like to see a stimulus closer to $1 trillion to really get the economy growing again.

That’s what I’d like to see.  I see zero chance of this actually happening with this Congress.

6. Will this year’s presidential election make the economy better or worse? Why?

I fear that it will make things worse, at least for the short term.  It is hard to imagine how our political system could be more gridlocked than it was in 2011.  Still, as congressional Republicans obstruct any initiative which might make the President look good, I worry that they’ll sacrifice the economy on the altar of politics.

As for the race itself, I see a worrying thread of extremism from the GOP candidates.  Even the supposedly-moderate Mitt Romney is proposing extreme policies which benefit the wealthy even more and skewer the middle class and poor even more (thereby skewering most of my customers).  I worry that the austere policies a Republican President might attempt to implement would decimate my customer base and my business.

7. What is Lexington’s biggest asset during these economic times? It’s biggest problem?

I think our schools – particularly UK – are our biggest asset.  They provide our city with well-educated people, great research to improve our lives and build businesses upon, and a vibrant “student economy” which spills over into the rest of our city.

I see two big problems for Lexington.  First, if the proposed redistricting is approved by Governor Beshear, a huge chunk of our city will not be represented in the Kentucky State Senate for two years.  Proper representation in Frankfort is vital to protecting Lexington’s interests and to protecting UK, and these undemocratic redistricting plans would deprive one-third of our city of its vote.  I worry about the impacts of Lexington not being represented in Frankfort.

Second, I think our city, our state, and our schools are under-funded.  I appreciate all of the efforts Mayor Gray has made to trim Lexington’s budget, but at some point, we citizens need to fund all of the services and infrastructure and improvements we’ve come to expect.

I want nice roads for me, my customers, and my employees.  I want them to be plowed and salted when nasty weather strikes this winter.  I want the best schools for my son and for my employees’ families.  I want the best fire and police protection.  I want a beautiful and safe city to live and work in.  But those benefits come at a price.  And we’re responsible for funding all of those “nice things”.

It won’t be popular, but I think we need to start a frank conversation about raising taxes to fund our city’s (and state’s and schools’) obligations.  We need to pay for the great things we want to do together.

8. What else should readers know that I haven’t asked about?

I hope they’ll go out of their way to buy local goods and services when possible.  That will keep more of Lexington’s money in Lexington, which helps foster a more vibrant local economy.

The American Idea

My wife and I are one-percenters.

We have amassed a small fortune – built over some 20 years of climbing our respective corporate ladders, saving very aggressively, and making some favorable investments.

We worked very hard to build our wealth.

But we are also incredibly lucky.

We were both winners of what Warren Buffett has dubbed “the uterine lottery”: through no effort on our part, we were both born into safe, stable, American, loving family environments where hard work and academic success were built-in expectations.  We were granted this huge headstart in life and had no part in earning it.

That early headstart only snowballed as it helped us accumulate advantage upon advantage in our early lives.

We benefitted greatly from our society’s investments in all sorts of public goods, public works, and public innovations.

More bluntly, because of our unearned headstarts, we benefitted disproportionately as we often extracted more value and more opportunity from these public goods than did our less-advantaged peers.

In our youth, we both got into honors-level courses at great public schools.  We both had great professors at our public universities, where we both received advanced degrees.

In our professional lives, we continued our disproportionate wins, taking greater advantage of public investments in roads, airports, research, computers, the Internet, housing, and police and fire protection.

As a business owner, I continue to receive disproportionate share of the benefits from the public investments which deliver customers and vehicles and qualified employees into my shop.

My wealth is – in great part – the result of decades of personal hard work, constant learning and creativity, and deep thought.

But my wealth is also the product of decades of unearned advantage which allowed me to receive an undeserved greater share of our society’s prosperity.

For my disproportionate bounty, I owe a disproportionate debt.


This “disproportionate debt” is the basis of the American system of progressive taxation – the reason that those with higher incomes and greater wealth pay taxes at higher rates.  The wealthy owe more to the nation which co-produced their wealth.

As President Obama’s jobs proposals and the Occupy Wall Street protests have gained favor among independents and an increasing proportion of Republicans, the national conversation has begun to focus on the responsibility of the wealthy in creating, perpetuating, and resolving our current economic woes.

In polls, the overwhelming majority of Americans support greater public investments in infrastructure, education, and public safety in order to create jobs.  And they support raising historically-low taxes on the wealthiest Americans to do it.

And yet, an increasingly-prominent conceit of conservative ideology holds that every person is merely the product of their own singular efforts, and that those with success owe nothing (or owe very little) to the society which made their success possible.

Purveyors of this ideology live in a kind of denial – conveniently ignoring the significant roles of simple luck, coupled with public investments in infrastructure, education, and research, in improving their own lives and in enabling the lives of the wealthy. They contend that the wealthy pulled themselves up by their bootstraps, and everyone else should as well.

After Warren Buffett – history’s most successful investor – argued in August that the very wealthy have a duty to pay more in taxes, Harvey Golub – former Chairman and CEO of American Express and former Chairman of AIG – expressed the “bootstraps” mentality in his opening to an indignant Wall Street Journal screed [emphasis added]:

Over the years, I have paid a significant portion of my income to the various federal, state and local jurisdictions in which I have lived, and I deeply resent that President Obama has decided that I don’t need all the money I’ve not paid in taxes over the years, or that I should leave less for my children and grandchildren and give more to him to spend as he thinks fit. I also resent that Warren Buffett and others who have created massive wealth for themselves think I’m “coddled” because they believe they should pay more in taxes. I certainly don’t feel “coddled” because these various governments have not imposed a higher income tax. After all, I did earn it.

The corollary to Golub’s “I earned it” meme is that poverty and joblessness are presented less as a result of unfortunate circumstance than they are as a reflection of moral failings on the part of the poor or unemployed.

When asked about the Occupy Wall Street protests, for instance, GOP presidential candidate Herman Cain told the Wall Street Journal [emphasis added]:

“Don’t blame Wall Street, don’t blame the big banks, if you don’t have a job and you’re not rich, blame yourself!”

At a book signing in Florida one day later, Cain added that the OWS protesters were un-American and anti-capitalist for protesting against Wall Street banks because “they’re the ones who create jobs” – despite overwhelming evidence to the contrary.  At a Republican debate a couple of weeks later, Cain was asked if he stood by his remarks, and his affirmation garnered the night’s biggest applause from the partisan crowd.

Paul RyanBut perhaps no one in today’s politics defends the rights of the wealthy quite like Wisconsin Congressman Paul Ryan. Ryan, who requires his staff to read Ayn Rand’s Atlas Shrugged for its policy insights, is the chair of the House’s Budget Committee.

Ryan is well known – and mystifyingly well-regarded as a “serious thinker” – for his attempts to use the budget process to accelerate social inequality.  Ryan’s 2011 budget plan, dubbed The Path to Prosperity, was an audacious reverse-Robin-Hood attempt to slash safety nets for the most vulnerable even as it it further slashed taxes for the already-wealthy.

With the President’s jobs agenda and the Wall Street protests gaining popularity, and the national conversation now squarely focused on jobs and inequality, Republicans have been losing control of the political narrative they dominated during this summer’s debt crisis.

In a much-anticipated speech, “Saving the American Idea: Rejecting Fear, Envy, and the Politics of Division”, delivered to the conservative Heritage Foundation last week, Ryan attempted to recast that narrative with an ideological agenda nearly worthy of an Ayn Rand protagonist.

In that speech, Ryan outlined the American Idea as defined by the “principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense”.

After chastising the President for promoting his jobs initiatives while “sowing social unrest and class resentment,” Ryan laid out the contours of his new narrative.

The central problem of economic justice in America doesn’t revolve around a wealthy class which isn’t doing its part, Ryan asserted, but around a social welfare system which inhibits economic opportunity and economic mobility.  Ryan contends that progressives don’t understand this because they confuse “equality of opportunity” with “equality of outcome” [emphasis added]:

These actions starkly highlight the difference between the two parties that lies at the heart of the matter: Whether we are a nation that still believes in equality of opportunity, or whether we are moving away from that, and towards an insistence on equality of outcome.

If you believe in the former, you follow the American Idea that justice is done when we level the playing field at the starting line, and rewards are proportionate to merit and effort.

If you believe in the latter kind of equality, you think most differences in wealth and rewards are matters of luck or exploitation, and that few really deserve what they have.

That’s the moral basis of class warfare – a false morality that confuses fairness with redistribution, and promotes class envy instead of social mobility.

There are a couple of major problems with Ryan’s new “equality of opportunity” narrative.

First, the playing field is never level at the starting line. Unmerited inequalities exist, and they often grow exponentially over time.

Ryan would have us believe, for instance, that a child born some forty years ago with dark skin to an impoverished single mother in, say, inner-city Detroit had all of the same advantages and opportunities afforded to a child born some forty years ago into a stable, upper-middle-class white family in, say, Janesville, Wisconsin.

The circumstances of the starting line matter.  And it is all-too-convenient for those given headstarts to pretend they don’t.

Second, economic justice doesn’t stop at the starting line.  We must also assure that the race is run fairly.

Running the race fairly isn’t about insuring “equality of outcome”, as Ryan contends.  Most participants will not “win” the economic race. But it is about making certain – through establishment and enforcement of the rules – that participants do not cheat or exploit one another. It is about making certain that we flatten very real hurdles of race, gender, and income (to name just a few).

And asking the wealthy to pay disproportionately into the system which helped provide their disproportionate prosperity isn’t “redistribution” – it is merely the repayment of a disproportionate debt. It is fairness.


I’m sure that Harvey Golub, Herman Cain, and Paul Ryan all worked incredibly hard to achieve their successes.  But somewhere along the way, as they deified their individual efforts and accomplishments, they forgot – if they ever recognized in the first place – the enormous and undeniable roles that luck and public welfare played in their successes.

In a town hall two weeks ago, for example, Ryan told a student that the Pell Grant program (federal assistance for lower- and middle-class students) was “unsustainable”, and Ryan noted that he worked three jobs to pay off his student loans.  Good for him.

But Ryan also leveraged his public school and public university education to get his start in Washington.  And while he promoted his private sector student loan as some sort of ideal, Ryan failed to mention that he also used his father’s Social Security death benefits to help pay for college. He went on to a taxpayer-supported career in Washington, including the last 13 years as an employee of the very government he regularly demonizes.

With no trace of apparent humility for their remarkable good fortune (nor apparent blush for their remarkable hypocrisy and greed), these successful men promote the mythology of the completely self-made success.

But no one with wealth got that wealth solely on the basis of their own virtues.  On their paths to success, each got help – sometimes deserved, often not.  To ignore the help we have received is to ignore our obligations to one another.  Worse, it betrays an unfortunate ungratitude.

The wealthy and successful extract greater value (and wealth and success) from our public goods, and thus owe a greater debt to the communities which contributed to their successes.


Paul Ryan is right, but inadequate: the American Idea does revolve around rewarding individual merit, effort, and ingenuity. But that isn’t all.  That isn’t nearly enough.

The American Idea also revolves around our ability to work together to do and build great things. Our civic commitments to greatness – especially in times of crisis – mark our national identity and our national success every bit as much as (maybe even more than) our individuality does.

Many of our nation’s greatest accomplishments – Social Security, Interstate highways, successes in World Wars I and II, the Civil Rights Act, National Parks, and even the free enterprise system itself – are built upon a foundation of mutual cooperation and mutual sacrifice.

The American Idea is simply not the either-or cartoon presented by Paul Ryan.

We are a great nation because of our individual efforts, of which we are justifiably proud.  And we are a great nation because of our mutual commitment to one another, of which we are profoundly humbled.  We must ensure both to build upon our greatness.

That is an American Idea worth saving.


One final note: I find it increasingly difficult to tolerate condescending, one-sided lectures on the virtues of individual effort and private enterprise (and on the evils of “redistribution”) when they come from political mercenaries who have financed their professional careers with public money.

And, yes, I’m looking at you, Paul Ryan.

Introducing CivilMechanics

Since its inception three years ago, the Lowell’s blog (blog.lowells.us) has been a strange beast.

It has been an admixture of news about Lowell’s, tips for car maintenance, thoughts about business and the economy, and assorted commentary on our community, on downtown, and on the city of Lexington.

While this assortment was in line with our stated intent to offer “our perspectives on cars, business, Lexington, and life,” it also resulted in a divided audience: those who care about cars and what is happening at Lowell’s (usually customers); and those who care about more civic matters.

As you might imagine, the practical overlap between these groups is quite small.  The car folks probably don’t care about musings on CentrePointe or Lexington’s streets and roads.  The civic folks probably don’t care about what’s happening with the Lowell’s website or how a brake flush works.

Still, I could kind of rationalize the Lowell’s blog as a local blog by, for, and about a local business and local issues.


I have been the sole contributor to the Lowell’s blog.  And over the past year or so, my postings have been far less frequent than I’d like.

Part of that has to do with the busy-ness of our business (I haven’t had as much time to devote to writing), but most of it lies in the fact that I’ve been wanting to write about new and different things.

In particular, I’ve wanted to shift my focus from predominantly local issues to predominantly national and global ones – to try, for instance, to decode what’s happening in Washington or Wall Street from my own distinct perspective.  These topics just didn’t feel at home among car care tips and shop news.

At the same time, I’ve wanted to extend the content of the Lowell’s blog to include new contributions and new kinds of content from my employees here at Lowell’s.  As I contemplated such a move, I didn’t want them to feel overshadowed by strongly-expressed views which they might not share.

CivilMechanics To resolve this dilemma, I’ve created a new blog called CivilMechanics (www.civilmechanics.com) – sponsored by Lowell’s – in which I will express my unique perspectives on a variety of issues.  (And, yes, “CivilMechanics” is an intentional multiple-entendre. I like that kind of stuff.) Please check out our first post, “Confessions of a Job Creator“.

I’ve also taken the liberty of migrating a few old Lowell’s posts to CivilMechanics which capture some of the spirit of this new blog.

Over the coming weeks, we’ll introduce new contributors to the Lowell’s blog.  I’ll also continue to post on the Lowell’s blog from time to time with items of interest to Lowell’s customers and Lexingtonians.

With these changes, I’m hoping to increase our overall frequency of posts, both for customers (through the Lowell’s blog) and for civic-minded followers (through CivilMechanics).  Please check them out, and be sure to let us know how we’re doing.

The Lowell’s Blog: blog.lowells.us

CivilMechanics: www.civilmechanics.com

On Compromise

Last night, Congress passed the $900 billion tax compromise reached between President Obama and Republican leaders.

In the end, progressives and conservatives alike lambasted the deal.  And that might be a very good thing.

I’m no fan of the bonus tax cuts for the wealthy that Obama conceded to congressional Republicans; Despite Republican claims, those cuts fail to create significant job growth.

Lost in much of the analysis over what Obama conceded, however, is just how many bigger concessions he won back from Republican leaders, as Ezra Klein points out with this chart:

Tax Cut Compromise Proportions

Unproductive and unneeded tax cuts for the wealthy make up only one-eighth of the compromise. The other seven-eighths of the deal are much more stimulative to our economy and to job production.

In essence, this tax deal is a second “stimulus” which is much-needed at this stage of our fragile economic recovery.


During the Constitutional Convention in Philadelphia in 1787, representatives of each state teetered on the knife’s edge between walking away from the proposed Constitution for what they might have to give up, and giving up important principles (and power) in order to gain something better, stronger, and more resilient.

While the present compromise is not nearly as momentous, it does remind me of what Benjamin Franklin – then 82 years old – said when addressing that convention in September, which galvanized the representatives into agreement:

I confess that there are several parts of this constitution which I do not at present approve, but I am not sure I shall never approve them: For having lived long, I have experienced many instances of being obliged by better information, or fuller consideration, to change opinions even on important subjects, which I once thought right, but found to be otherwise. It is therefore that the older I grow, the more apt I am to doubt my own judgment, and to pay more respect to the judgment of others. Most men indeed as well as most sects in Religion, think themselves in possession of all truth, and that wherever others differ from them it is so far error. Steele a Protestant in a Dedication tells the Pope, that the only difference between our Churches in their opinions of the certainty of their doctrines is, the Church of Rome is infallible and the Church of England is never in the wrong. But though many private persons think almost as highly of their own infallibility as of that of their sect, few express it so naturally as a certain french lady, who in a dispute with her sister, said “I don’t know how it happens, Sister but I meet with no body but myself, that’s always in the right – Il n’y a que moi qui a toujours raison.”

In these sentiments, Sir, I agree to this Constitution with all its faults, if they are such; because I think a general Government necessary for us, and there is no form of Government but what may be a blessing to the people if well administered, and believe farther that this is likely to be well administered for a course of years, and can only end in Despotism, as other forms have done before it, when the people shall become so corrupted as to need despotic Government, being incapable of any other. I doubt too whether any other Convention we can obtain, may be able to make a better Constitution. For when you assemble a number of men to have the advantage of their joint wisdom, you inevitably assemble with those men, all their prejudices, their passions, their errors of opinion, their local interests, and their selfish views. From such an assembly can a perfect production be expected? It therefore astonishes me, Sir, to find this system approaching so near to perfection as it does; and I think it will astonish our enemies, who are waiting with confidence to hear that our councils are confounded like those of the Builders of Babel; and that our States are on the point of separation, only to meet hereafter for the purpose of cutting one another’s throats. Thus I consent, Sir, to this Constitution because I expect no better, and because I am not sure, that it is not the best. The opinions I have had of its errors, I sacrifice to the public good. I have never whispered a syllable of them abroad. Within these walls they were born, and here they shall die. (…) I hope therefore that for our own sakes as a part of the people, and for the sake of posterity, we shall act heartily and unanimously in recommending this Constitution (if approved by Congress & confirmed by the Conventions) wherever our influence may extend, and turn our future thoughts & endeavors to the means of having it well administered.

On the whole, Sir, I can not help expressing a wish that every member of the Convention who may still have objections to it, would with me, on this occasion doubt a little of his own infallibility, and to make manifest our unanimity, put his name to this instrument.


Progressives hate what was conceded in this deal.  So do conservatives.  And everyone should be concerned over how much this deal grows our national debt.

Both sides wanted their leaders to stick to core principles – no matter the cost.  But that’s demogoguery, not democracy.  It isn’t how our country works.  It isn’t how our country was formed.

“Compromise” has become a foul word in this political season.

But it is the very heart of a functioning democracy.

The Limits of Local

I am a strong proponent of ‘buying local’ – purchasing goods and services from local businesses to boost the local economy.  I made a case for Local First in our recent To-Do List for Lexington series late last year.

PB080070But I’m not a local ‘purist’.  There are times when buying local is just not practical.  And there are times when non-local competition creates a healthy diversity for local consumers (and providers).

So a recent Twitter discussion and this blog post got me thinking about the limits of ‘local’.  The tenor of these conversations was that a candidate for Lexington mayor [one that I personally support, by the way] was ‘disloyal’ to Lexington for using a Washington, D.C. firm to design the campaign’s temporary website.

These discussions echoed several earlier ones about the purchase of non-local services by our city’s government.

For me, the discussions raised an important question about buying local, especially with regard to public dollars and public figures:

Should buying local goods and services be a requirement or an aspiration for a political candidate?  For a local government?

The indignation of the writers seemed to imply that buying local goods was some sort of requirement – some sort of ‘litmus test’ for determining whether a candidate was good enough to run.

From my perspective, this line of thought leads to unreasonable conclusions about what disqualifies candidates (or what constitutes good governance).  For instance:

  • They can’t shop at Walmart.  Or Kroger.  Or Best Buy.  Or Home Depot.
  • They can’t eat at Chick-Fil-A.  Or Qdoba.  Or Five Guys.  Or Bonefish.
  • They can’t drive a Toyota.  Or a Ford.
  • They can’t drink Coca-Cola.  Especially the imported Mexican Coke with real cane sugar.
  • They must only drink Bourbon produced in Fayette County.  (And wait a few years until it is actually available.)
  • They can’t update their blog with an HP or Dell laptop.
  • They can’t tweet with their iPhone.  Or BlackBerry.  Or Droid.
  • They can’t watch TV produced in Hollywood.  Or New York.
  • They can’t use Microsoft Office.  Or Adobe Acrobat.
  • They can’t use Facebook.

In short: They can’t use any product or service which contains any non-local content.

Is such a list of prohibitions ridiculous?   Of course.

And that’s precisely the point: Requiring some sort of ‘purity’ in local purchasing creates an excessive, unreachable, and unproductive standard.

Buying local should be an aspiration – something we strive for, something we measure and attempt to improve, something we do more of.

Do we need our city, our political candidates, and our citizens to buy more local goods and services?  Should we actively encourage more purchasing at great local spots like Fáilte (profiled by Tom Eblen in yesterday’s Herald-Leader)?  Absolutely, on both counts.  That was why I wrote my original Local First post.

We should spend more of our money here in Lexington.  But forcing our city to spend all of our money here would stifle Lexington’s economy, and restrict us from being truly productive.

So let’s adopt a reasonable posture aimed at encouraging our leaders to buy local.

Health care reform: A small business perspective

This week, we’re finalizing our shop’s health insurance requirements for the next year.  Our policy will be 25% more this year for the same coverage.  Last year, it grew by 16%.  Compounded, that’s 45% in two short years.  No other cost increases on that scale for us.

As a small business, the spiraling costs of health care hit us particularly hard each year.  And the need for a new approach to health care is particularly acute, for us and for our employees.

I’ve been puzzling over health care for a long while – and I won’t claim to have the answers here.  But I thought it could be helpful to step away from the town hall and cable channel histrionics and fear-mongering to share some observations on health care from a small business perspective.

Insurance companies are like casinos: The house always wins.
Insurance companies have received a lot of criticism during the
health care reform debate.  But they are doing precisely what they are
designed to do.  They make money for investors by taking bets on the
health requirements of their customers.

Insurance companies operate like casinos or racetracks: the table is
always tilted in favor of the house.  They may lose big on a single
‘jackpot’, but across the full array of customers they nearly always win.  And when they don’t win ‘enough’, they’ll raise the cost of making bets with them.

When we enter into agreements with insurance companies, we’re always taking a sucker’s bet that we’re very likely to lose.  The only reason an insurance company takes our money is because they ‘bet’ that we won’t need that amount of medical care.

Ultimately, as with the casino, the house wins.

The oddity of employer-provided health insurance.
We don’t really question it much today, but it is just plain strange that something as personal and as private as health care is mediated by employers at all.  We don’t usually involve our employers in house payments or banking or appliance purchases or car insurance.  But, somehow, we’ve come to expect them to provide health care insurance.

Employer-provided insurance is an historical artifact from negotiations between General Motors and labor unions in the late 1940’s and early 1950’s.  Charles Wilson, GM’s CEO, saw it as a last-ditch concession to help prevent the ‘nationalized healthcare’ system that Harry Truman was championing – which Wilson saw as a threat to the integrity of the free enterprise system.  (Funny how many things just don’t change.)  Soon, other employers adopted health care coverage as a standard part of their benefits packages, and employer-provided insurance became the norm.

But, really, why are we employers involved at all?

One reason that employers remain involved is that they often have more buying power than individuals.  Over the past 60 years, we’ve been able to provide leverage which lets us negotiate somewhat better plans with insurers and medical providers.

But small businesses have scant more negotiating leverage than an individual.  Often, our employees choose to get independent coverage rather than participate in our group plan.

When Lowell’s bid out to three other health insurance companies, the results were disheartening.  The other three companies offered rates that were 200% to 300% higher than our current rates with Anthem.  So we’re ‘trapped’ with Anthem.


Expanding waistlines, increasing costs.
As a nation, we’re getting a lot unhealthier.  We eat more.  We exercise less.  We sleep less.  We’re in worse health.  We’re living longer.  And we need more care.

We don’t spend much time, effort, or money on the preventative health care and self-care which would help eliminate the much more expensive catastrophic care.  We’re too busy to exercise.  We don’t want to pay for the mammogram.  We don’t like waiting in the doctor’s office.

And we require more medical care as a result.  Often, we get that
care after a catastrophe built upon years of self-abuse: We have a heart
attack.  Our knees fail.  The cancer spreads.  (We see the same phenomenon with routine maintenance in the car business – put it off, put it off, put it off, then replace an engine.)

Health care is getting more expensive, in part, because we are getting unhealthier.

Rising expectations, increasing costs.
come to expect more from our medical system.  We expect our doctors,
staff, drugs, equipment, and facilities all to improve.  And we should expect improvement as medical science advances.

those advances are costly.  The astronomical research and development
costs for the medical ‘miracles’ of MRIs and cholesterol-fighting drugs
and ‘little blue pills’ have to be paid for in some fashion.

And doctors, hospitals, and insurance companies won’t simply absorb those costs.  They will pass them on to patients.

Health care is getting more expensive, in part, because health care is getting better.

There are no painless solutions.
We’ve seen politicians, lobbyists, pundits, and fellow citizens all offer various versions of ‘painless’ solutions to the healthcare problem.

They promise that government should bear more of the burden. Or that government shouldn’t bear any of the burden.  Or that we just need full, universal insurance.  Or that insurance companies should pay.  Or drug companies.  Or hospitals.  Or doctors.  Or that we shouldn’t have to pay for the chronically uninsured.  Or that we should just collar all the lawyers and their malpractice suits.  Or we should just have more competition.

Nobody says that we must bear the responsibility.  But we must.

If we refuse to provide insurance or government coverage for the roughly 45 million uninsured Americans, what happens to those who can’t pay?  Hospitals and emergency rooms will still provide care.  Their costs will go up.  And they will pass those costs to other patients in the form of, say, an $8 dose of ibuprofen.  We pay.

If we provide government-paid health care to them (or to ourselves), what happens?  Our national deficit will rise.  This week’s projection of a $9 trillion deficit over 10 years amounts to about $30,000 per man, woman, and child.  Which will have to be funded through taxes.  We pay.

If we have full universal coverage in a government program, what happens?  Because they don’t bear the initial brunt of the costs, patients get more health care than they really need.  And doctors and medical institutions will happily provide (or suggest) that profitable care.  More deficit.   More taxes.  We pay.

If we squeeze insurance company profit (or put greater requirements on them), what happens?  They will likely refuse coverage for the riskiest, least profitable customers.  Unable to find private coverage, those customers will opt to go without coverage or to go with a public plan.  More $8 (or, now, $10) ibuprofen.  More taxes.  We pay.

If we squeeze drug or equipment company profits, what happens?  They have less to invest in research and development.  They take fewer risks, and release fewer blockbuster drugs or fewer equipment breakthroughs.  Improvements in our medical care falter.  We pay.

If we collar lawyers and malpractice suits, what happens?  Doctors’ malpractice insurance costs will likely go down.  But a few careless doctors who commit malpractice may inflict injury or death without significant penalty.  And who ultimately bears the cost of that irresponsibility and that injury or death?  We do.  We pay.

If we allow more competition between insurance companies, what happens?  The insurance companies look at the same basic actuarial tables.  They evaluate risks in the same way.  They put a price on the ‘bets’ they are willing to take in the same way.  And their prices remain about the same as without as much competition.  We pay.

We want ever-better medical care.  We are getting unhealthier.  We want someone else to pay for it.  But they won’t.  We must bear the responsibility.  We must pay.

Can government, insurance companies, hospitals, and doctors get more efficient?  Sure.  Are there opportunities to eliminate waste?  You bet.  Can we patients get healthier and do more preventative care?  Absolutely.  But it will cost us in some way.

There are no painless solutions.  In the end, we all pay.

The moral obligation
“Is health care a right or a privilege?”

It is a question that we don’t talk about enough, and which underlies much of the national divide about health care today.  Is health care a right to which all people are entitled?  Or, is it a privilege bestowed only upon those who have earned it?

It is an interesting question, and the health care debate has hinged upon how people answer it.

Except that I think that it is the wrong question.

The “right or privilege” question presupposes that rights and privileges are somehow separable. I don’t think that they are.

I think of health care in many of the same ways as I think of citizenship or, even, to being a human being.  As citizens and as humans, we have certain ‘inalienable’ rights.  Heck, our country was built upon them – “Life, liberty, and the pursuit of happiness”.

But those citizen’s (and human) rights come with deep responsibilities.  We must participate.  We must act in certain ways.  We must work together to improve our nation and our well-being.  We can’t abuse the fundamental rights we have been given.

For me, health care comes down to a moral issue.  I can’t tolerate 45 million fellow citizens living without a safety net.  I can’t tolerate wasteful spending on needless tests and procedures on the public dime.  I can’t tolerate 45% increases in insurance costs over 2 years.  I can’t tolerate ‘competition’ which triples my existing rates.  I can’t tolerate people (including me, unfortunately) who don’t take good enough care of themselves.

I can’t tolerate the status quo.  Can you?

For me, health care is a citizen’s right.  And an earned privilege.  We must strive to provide health care for fundamental human needs whenever possible, while simultaneously striving to ensure we grapple with the responsibilities that come along with that privilege.

So to the politicians, lobbyists, pundits, and citizens engaged in the public debate, I say: Grow up.  Step up to the plate.  Quit attacking.  Get realistic.  Have adult discussions.  Lose the scare tactics.  Work together.  Compromise.  Take responsibility.  Live up to your moral obligations.

Then, maybe, just maybe, we can build a better health care system.  For our nation.  And for one another.


I choose both

“The test of a first-rate intelligence is the ability to hold two
opposing ideas in mind at the same time and still retain the ability to
function. One should, for example, be able to see that things are
hopeless yet be determined to make them otherwise.”

                                                — F. Scott Fitzgerald (via Ace Weekly)

“You must be the change you wish to see in the world.”
                                                — Mohandas K. Gandhi

There is a revolution brewing in Lexington.  Fed up with the intransigence and bureaucracy of ‘old’ Lexington, ‘new’ Lexingtonians are gearing up for an overthrow of the old regime.

As a lifelong rebel and iconoclast, I love it.  As a business owner, I want the more vibrant Lexington (and downtown) that these changes promise.  As a father of a two-year-old, I want my son to have the greatest opportunities to learn, live, play, and work – and want his birthplace to provide those opportunities.  Lexington must change, or it will not grow.  If it does not grow, Lexington will wither and die.

Still, I’m a bit troubled…

More on why in a bit.  First, we need to describe the new and old Lexingtons.  (Or, if you Twitter – and you should#OldLex and #NewLex.)

OldLex is rooted in our city’s and our region’s traditions.  It wants to build on the heritage of our horse farms, our coal, our bourbon, our tobacco, and our basketball.  It values formality and processes and order and control, and is often obstinate in the face of change.  OldLex tends to respect big international companies, large events, and wealth.  It generally shuns technology.

NewLex is borne of our city’s innovative and intellectual potential.  It yearns to be free of restrictions and limitations imposed by centuries of tradition.  It values innovation and creativity and transparency and freedom, and usually gleefully wallows in the messiness and chaos of change.  NewLex tends to respect speed, intellect, local-ness, and the environment.  It embraces technology.

So there, in admitted caricature, are the two cultures of Lexington.  They currently stand in perplexed opposition to one another.  They blink in bewilderment at the other’s actions (or inactions) and question the other’s motives.

I am a confirmed NewLex kinda guy.  As a reader of this blog, I suspect that you also lean toward the NewLex camp.

But, as I mentioned, I’m troubled by something in the conflict between NewLex and OldLex.  I also hear the same concern echoed in comments on my blog and in NewLex Twitter discussions.  In summary, it is this: The desire for continuity is almost as strong as the desire for change.

While we decry the adoption of outdated icons of horses as the central identity our city, we still love the beautiful horses, the farms, the racetracks, and the uniqueness they bestow upon our city and state.

We wish that some of the $36.5 million that just went to our new basketball coach had gone instead to improve our schools or our university.  But we do love our ‘Cats, our Coach Cal, and our championships.

We cannot fathom why our city’s representatives haven’t adopted more transparent practices and implemented more current technologies, but what, really, have we done to facilitate that?  (Have I already forgotten how mystifying Twitter was just a couple of months ago?)

As much as we advocate overturning the old ways of thinking and the old ways of doing things, we NewLexers sure like a lot of the old things.

And we should like them.  The horses, the basketball, and the bourbon are all significant and important parts of our heritage and our identity.  They are a part of what makes us ‘US’.

And in that heritage lies our one bond with our OldLex foes, and, I believe, our single best opportunity to effect real and necessary change in our city.  As NewLexers, we must challenge ourselves to embrace and leverage our past as a springboard into our future.

Can a vibrant horse industry exist alongside an even-more-vibrant Eds-and-Meds economy?  I think so.

Can we use Lexington’s defunct distilling industry and empty warehouses to build a vibrant arts and cultural (and distilling!) community?  I think so.

OldLex certainly comes with many flaws.  But, if we’re honest with ourselves, NewLex can be just as problematic.  We often come off as brash and abrasive.  I kinda like being brash and abrasive.  The problem is that ‘brash and abrasive’ doesn’t get the hard work of changing our city done; It brings such work to a halt as OldLex digs in their heels.

NewLex often appears impractical.  We are full of plans and ideas, but frequently come up way short on tangible actions and, ultimately, results.  We must learn to transform our ideas and plans into actions on the ground.  We must, in short, be the change we wish to see in the world.

So I make a declaration that may not be popular with all of my NewLex compatriots: I choose both.  I choose the heritage that makes Lexington great.  I choose the creativity and intellect that will drive us into the future.  I choose to act with transparency and speed.  I choose to love the singular beauty of our horse farms.  I choose to reject the parts of (Old AND New) Lexington which hold our city back from becoming truly great.  NewLex?  OldLex?

I choose both.  I choose Lexington.

A better brand for Lexington

Lexington’s leaders are busy picking a new brand for our city.

Sorry, gang.  You don’t get to decide.

Lexington_01_sm Last week, the Urban County Council’s Planning Committee considered the city identity possibilities of the blue horse that Pentagram (an international design firm) crafted for the Lexington Convention and Visitors Bureau.  The committee forwarded the discussion on to the full Council.

Unfortunately, the Blue Horse Debate is a waste of time, talent, money, and attention.

Our representatives fail to realize that Lexington’s brand is largely out of their hands.  And it certainly isn’t in Pentagram’s hands.  Whether they choose
to promote a blue horse or a spotted yak is irrelevant to Lexington’s brand.

Telling versus Earning
Marketers (and leaders) suffer from a kind of conceit.  The marketers’ conceit is that they can tell us what their brand means.  They fail to realize that brands are reputations which are earned.

A brand isn’t a
declaration.  It isn’t an intention or a vision.  It isn’t what leaders say it is, no matter how well it is designed and researched.  It isn’t a great ad campaign or a really slick logo or a lyrical tag-line.  It is certainly not a marketing function.

Brands arise from all of our experiences with that product or that city, not from what the leaders of any company or city want them to be (or say they are).

The best brands don’t tell people they’re great.  They earn greatness.

If people believe that Lexington is a boring town, then (unfortunately) that is part of our brand.  If people believe that we are a technology backwater, then that, too, is part of our brand.

This is scary because our brand is pre-set in peoples’ minds, and it takes a lot of hard work to be good enough to dislodge entrenched perceptions.

It is scary because it isn’t about saying we’re better; it is about actually BEING better.  Really better, not just in-our-marketing-plan ‘better’.  Not just approve-a-message/logo/strategy-in-a-meeting ‘better’, either.

We have to earn a reputation for better schools, better businesses, better technologies, better leaders (and not just at LFUCG, either), better conversations, better people, and better visions of the future.  And we can’t buy that reputation from any design or branding firm.

To improve our brand, we have to truly transform Lexington.

So why do our representatives persist in their silly pursuit of the blue horse?

Over the years, I’ve frequently witnessed something I call institutional inertia.  Institutional inertia happens when individuals in an organization don’t really feel responsible for (or influential upon) the success of the organization.

In those cases, the easiest thing to do is just stay the course, even if that course is doomed to failure…  When inertia raises its ugly head, it is often, maddeningly, the powerful (those who think they have the most to lose) which become the most hostile to change and most determined to stay the destructive course.  Doing nothing is always easier than doing the right thing, especially when doing the right thing is a lot of hard work.

And paying someone to design an ‘identity’ is an easy-but-doomed course for improving Lexington’s brand.  There is no ‘magic bullet’ for crafting a better brand for our city.

If we want a better brand for Lexington, then make sure our city is an attractive, welcoming place for our visitors.  Ensure that our people are knowledgeable, warm, and friendly.  Create rich, distinctive, and memorable experiences for both our citizens and our visitors.  Foster the growth of vibrant businesses and arts communities that make Lexington a compelling place to work and play.

Then, perhaps, Lexington will earn the better brand we are seeking.

Update: 4/28 Cross-posted to both Ace Weekly and Transform Lexington.

Full disclosure: In a previous job, Rob severed his firm’s relationship with Pentagram.

[where: 200 E Main St, Lexington, KY, 40507]

Discovery tale: Do you have a Bugatti in the garage?

1937-bugattiThe recent discovery of a classic, rare, and dusty 1937 Bugatti in an old English garage got me thinking.

The Bugatti fits neatly into the popular imagination as a kind of “discovery tale”.  Discovery tales are those romantic, hopeful stories about finding some valuable piece of treasure in an unexpected place.

The discovery tale permeates our culture:

  • The Rembrandt (or Picasso) in the attic
  • The winning Lotto ticket
  • The mid-19th-century stock certificate left by a long-lost aunt
  • The pot of gold at the end of the rainbow
  • The gambler who wins the big jackpot in Vegas
  • The starlet discovered in the drugstore
  • The search for El Dorado
  • Cinderella
  • The Antiques Roadshow

These are all stories built around the discovery tale.  Usually, the tales result in untold millions for the “discoverers”: the family who found the Bugatti will be getting nearly $4.5 million.

It is a compelling story.  Except that it is totally unrealistic.

Don’t get me wrong — I really like these stories, too.  As long as they are treated as fun, fantastical tales.

When the discovery tale becomes a personal strategy for wealth or success, it is a problem.  It is deadly when it becomes a build-it-and-they-will-come business strategy.

It is a problem in two ways.  First, it promotes faith in a highly unlikely outcome.  What do I mean?  Let’s be generous and suppose that there are 100,000 Bugattis (or Rembrandts or jackpots or stock certificates) in the world.  Only a fraction of those Lotto tickets are going to be found in any one year (it took nearly 50 years for the family to find the Bugatti – there’s a reason that such discoveries are so rare and notable).  Again, let’s be generous and assume that 5% of these (5,000 or so) are discovered per year.

At this point, there is literally a one-in-a-million chance that you will be the discoverer of the next Bugatti in 2009.  And that’s after being generous with our assumptions.

If you are now tinkering with the assumptions — “Maybe there are really a million Bugattis and there’s really a 20% chance of finding one…” — please STOP.  It is nice to hope, but it is destructive to manipulate the odds in order to justify hoping.

The second big problem with discovery tale strategies is that they are passive.  Discovery tales encourage waiting and hoping as a substitute for industry and ingenuity.  People put off getting a better job or starting their own business while they wait for “things” to get better or for their lottery ticket to come in.

So am I a total cynic?  No.

Everyone has undiscovered treasure.  But you don’t find it.  You use it.  Your treasure lies in your hands and between your ears.  You are the garage — go make your rare Bugatti.

[where: United Kingdom]

Two ways

There are only two ways to live your life:
One is as if nothing is a miracle;
The other is as if everything is a miracle.
– Albert Einstein

As I see the world through my 2-year-old son’s eyes, I’m constantly reminded of the everyday wonders we sometimes take for granted as adults.  I’ve always liked Einstein’s “two ways” quote, and have tried to maintain a child-like amazement at what I encounter in life.

Jaded people (the “nothing is a miracle” people), frankly, bore me to tears.  It is far too easy – and lazy – to pretend that you’ve been there and done that, and that there is nothing new or wonderful in the world.  Ultimately, that cynical attitude stunts one’s ability to grow, learn, and change.  It isolates jaded people from others.

I was talking (debating, really) with a group of business leaders the other day, and it struck me that there is a nearly identical “two way” attitude division in the business world.

The Lazy Way
Some companies approach their business with a cold, calculating, flinty-eyed precision.  These companies look at business as a pure numbers game.  They often see their customers, suppliers, and employees as opponents or obstacles or dupes to be taken advantage of in their pursuit of the almighty dollar.

They see every relationship as an opportunity to “take” — in fact, “relationship” is seen as a soft, weak, and silly notion which has no place in business.  This is the case among executives at my last company.

In their lazy reliance on numbers, such miserly companies manage for the short term, the “quick fix” — “Let’s make a mint before the customer (or employee or supplier) gets wise to us!”  Eventually, these companies get so disconnected from customers and employees that the dominant day-to-day focus of the organization is on internal politics and positioning.

From my experience, I can tell you that such shrinking companies are miserable places to work, and they ultimately suffer long, slow, painful deaths as customers and employees flee in droves.

The Generous Way
Other companies adopt a fundamentally different philosophy and approach to their business.  They approach business with a spirit of generosity.  They see that building long-term relationships with customers, employees, and community creates both financial and human rewards.  While the numbers might inform their choices, these companies make decisions based on doing the right thing.

“Doing the right thing” shifts the focus from the financial numbers to the human equation. Doing the right thing isn’t easy.  It can be hard work.  It isn’t always profitable.  “Right thing” companies usually grow more slowly than “quick fix” companies (at first).  But they do continue to grow when quick fix companies fade (or implode). They build lasting relationships which sustain them through good times and bad.

The “right thing” companies still pursue profit, but their primary focus is outward: on generous relationships with their customers, their employees, and their communities.  They trust that the profit will follow.

These growing, vibrant, connected companies are engaging and rewarding places to work (and to do business with), and they have long-term employees and customers.

Everything is a Miracle
As the economy weakens, many companies have scrambled back to the quick fix of analyzing cold, hard numbers (and charts and plans) and have abandoned their “soft and fuzzy” relationships with people.  The numbers make them feel safe and precise and comfortable.  But they aren’t any of those things…

They might not know it yet, but they are the walking dead.

The companies who will ultimately thrive in this economy (and who will drive real economic growth) are the ones who continue to connect with their customers, employees, and communities — and who continue to do the right things.

But Albert Einstein could have told you that.  My 2-year-old could have told you that.  It is just that simple.