(Started writing this post last night and mysteriously lost half of it to the Typepad content trolls. Anyway, it's finished now.)
In my last corporate gig I once had a supervisor, a Vice-President, whose default response to the company's often-questionable business decisions was, "But we've got to grow the business." This was a dead-tree publishing company, much like the one profiled here, that had started decades earlier with one flagship brand, expanded to include a handful of other niche-specific titles, and largely stayed the same for the better part of 30 years before suddenly exploding its holdings in the 1980s. During that time, the company took advantage of cheap credit and junk bonds to acquire more magazines, and even whole rival publishing houses until the whole company, bloated beyond recognition by waves of acquisitions and mergers, was sold at the end the '90s in a leveraged buyout.
You can probably guess the endgame scenario because it wasn't much different from Time's: Billions of equity sucked out of the company to service its debt, a shrinking and demoralized workforce, a swollen portfolio of overlapping brands that poached readers and advertisers from each other, and a private-equity ownership group that responded to every missed revenue forecast by assuming even more debt to, yep, buy up more companies for no other reason but to generate cash flow to pay off the shareholders and keep the creditors at bay. By the end, there was no recourse but bankruptcy court, and while the company soldiers on to this day, it's a shell of what it once was in its heyday, its performance long since eclipsed by the Internet (which the company never invested heavily in due to the weight of its decade-long debt burden) and smaller, more nimble publishing houses that have scaled their titles to smaller but underserved niches.
And yet, throughout the whole period of declining revenues, upper-level management types like me were repeatedly being told of the need to "grow the business"---even as the resources that were needed to actually "grow" the business were being drained out of the company to pay off the private-equity guys, to placate the shareholders, and to provide seven-figure severance packages for the revolving door of failed executives who came and went each year. To me, it was obvious early on that the question we should have been asking ourselves wasn't, "How do we keep getting bigger?" but "What's the best way to scale down the business so it's a sustainable enterprise going forward?"
In my case, it wasn't for lack of trying. I asked this question many times in various executive meetings, and as a matter of routine was ignored.
Now, this sad state of affairs hasn't been unique to print publishing. Think of other corporations that embarked on never-ending revenue quests to Stay Big or Get Bigger over the past 30 years: Car companies like GM and Ford, and big banks like Citi and JP Morgan, kept growing not by reinvesting smartly in their core brands but by acquiring rival companies and expanding their product and service lines until their foundational business divisions had become overwhelmed by cash-sucking side ventures. If you see a common thread at play here, you're right---all of these companies kept growing and growing and growing until they were no longer sustainable and were forced by changing market conditions to ditch billions in assets at fire-sale prices, lay off thousands of employees at every skill and experience level, seek bankruptcy protection from greedy rent-seekers, and even beg the government for money to keep the lights turned on.
I guess what I am saying is, we've reached a point in the lifespan of Corporate America where "growing the business" for no other sake than to keep regurgitating bonuses for executives, dividends for shareholders, and interest payments for creditors---to continue gorging a credit-driven investor feeding machine that continually demands ever greater returns---essentially dooms a company to the fate of the dinosaurs, and that unless our job creators adopt and embrace a new and more viable business model, the demands of the marketplace will impose it on them:
Though the public hasn't grokked it yet, WalMart and its kindred malignant organisms have entered their own yeast-overgrowth death spiral. In a now permanently contracting economy the big box model fails spectacularly. Every element of economic reality is now poised to squash them.
Diesel fuel prices are heading well north of $4 again. If they push toward $5 this year you can say goodbye to the "warehouse on wheels" distribution method. (The truckers, who are mostly independent contractors, can say hello to the re-po men come to take possession of their mortgaged rigs.)
Global currency wars (competitive devaluations) are about to destroy trade relationships. Say goodbye to the 12,000 mile supply chain from Guangzhou to Hackensack. Say goodbye to the growth financing model in which it becomes necessary to open dozens of new stores every year to keep the credit revolving [...]
What we're on the brink of is scale implosion. Everything gigantic in American life is about to get smaller or die. Everything that we do to support economic activities at gigantic scale is going to hamper our journey into the new reality. The campaign to sustain the unsustainable, which is the official policy of US leadership, will only produce deeper whirls of entropy.
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Baron V