So much has happened so fast in recent months - government intervention in banks, insurance companies, possibly in the huge auto industry. What is next? What is happening? Are we becoming Social Democrats?

I have written several posts on the stark comparison between Republican-style free and unfettered business values and more historical communist societies. Now it is time to start talking about the more subtle nuances of a “Social Democrat” model like much of Europe has.  America has moved in that direction lately (under a Republican president). How far are we along? Where are we going? Do we want to go there?

Yesterday Brian Kilmeade of Fox News interviewed California governor Arnold Scharzenegger (R) and talked about this principle. There are things to be learned from this talk.

Arnold Schwarzenegger in interview where he discusses his experience with socialism in Europe

Click it to play.

As we know, governor Schwarzenegger was an Austrian before he came to America and later became a US citizen. He talks about his experience there with European socialism, why he left, how he hopes America does not go down that path, and how this ties in with what is going on today.

Here is a partial typed transcript of the interview above:

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Kilmeade: You said you came to America because you wanted to succeed – you felt that Europe was too socialized. Here we are bailing out the banks, we’re bailing out the auto industry, we’re picking different investments, different insurance companies to bail out and not bail out. Are we becoming what you left?

Schwarzenegger: Not, not by any means, but there is always the danger and I have always promised myself that I will do everything that I can, not to become what Europe was four decades ago when I left it. Since then Europe has learned from America how to privatize things, not to have government own everything and run everything, not to have 70% of the people work for government – a lot of countries have changed. But a lot of countries, again, have not.

I don’t want that system in America.. That is the important thing for me”

I have been promising a joke the Russians used to tell, under their state-socialism (we called it Communism but they always reminded me they had not reached the Communistic ideal yet - it was just socialism).

An old man had been given the job of being a lookout posted atop Lenin Hills in Moscow, watching for the coming of the “Classless Society” (The communist ideal world). He was doing such a good job some Politburo people approached him with another job they thought was important, watching for the next crisis in the capitalist system.

“It sounds good, but no thanks,” he replied. “I don’t want to give up a permanent job for a temporary one.”

With over 50 years of experience in the experiment of state socialism (I heard this one in the seventies) the Russians of that era need to be credited at least with having learned something. To their great credit they could make poignant jokes about it.

But true.

Crisis has been a huge part of the strength of our economy, historically. Good business ideas thrive. Bad ones die. Life goes through cycles.

I was taught in economics that every ten years or so there would be a recession. That was part of the cycle. It has been pretty much true. I was born in 1950 and there have been 6 since then that I remember. This article lists nine.

Guess what? Every recession is a crisis in capitalism. People lose jobs. The value of stock shrinks. People’s retirements lose some of their paper value, if it is in stocks (advisors used to always say never put it all in stocks as you get older - what happened?).

But then what happens after this “crisis?” Businesses and the economy bounce back. People get smarter. Businesses get more innovative and more efficient. Some of the sludge has been burned out of the engine. It runs cleaner.

I know it is painful. Tell me about it. I lost a business in the early nineties partly die to the recession of 89-92. But guess what? I also started another one - one that is still successful. And I re-invented myself, and got ready for a new way of doing business. That is what got me primed for entering the Internet business world in 1995. If the crisis had not come, I would probably still be back there.

I was talking about this with a colleague and we were discussing the horrible years before Reagan was elected president in 1980 and the change that came after that. The economy was in shambles in the late 70’s. Inflation was near 15%. Unemployment meteoric. Business was stagnant. Energy crises were common. Worst of all, people were not starting small businesses.

Contrast that with ten years later - the late eighties. Entrepreneur-ism was everywhere. Businesses were exploding. The stock market had gone from under 1000 to almost 3000, a whole new revolution in Information and Communications was underway, led largely by entrepreneurs. Something clearly was going on.

It DID seem to be related to the Reagan years - the opening up of business opportunities, tax cuts, deregulation, just the “can-do spirit!” The whole world was led into an amazing new economy by the US - that is still going on! And the Democrats and liberals were shouting “Voo-doo economics” all the way!

In our discussion we wondered if, had things kept going under the more state-controlled systems of “The Great Society” years (started by Lyndon Johnson and carried through the Carter years), maybe Bill Gates would have been working for IBM, Steve Jobs have been an insurance salesman and Michael Dell, well, a college drop-out!

Take a look at the chart below and the web site that it links to.

Slice of stock market history

What, exactly, did the approach to socialism that lasted from the mid sixties through the end of the seventies do for the economy? Look at the charts again.

Flat.

Do you see now why some are worried about a turn back towards socialism, of any kind? We can’t be scared by crisis! We also cannot be scared off by the fear mongers who try to push us back under the ‘comforting’ umbrella of state control.

Take a look at these words from the London Daily Telegraph - sober words:

“This is what socialist economics brings. The intervention, or rather interference, of the state in financial and economic matters can only lead to sclerosis, the suppression of enterprise, the raising of taxes, starvation of investment, lack of innovation, technological retardation and the rise of the power of organised labour…If you doubt this analysis, recall what happened in this country between 1945 and 1979, when such an ethos as we are now returning to existed unchallenged, even by Tory governments. The more the state intervened, the more it had to intervene: the appetite grew with eating….”

Then look what the Brits had to say about the truth of America’s example:

“…We condemn America as the nation that used capitalism as a weapon against so-called “ordinary people”, but think back and compare America in the 1970s to Britain at the same time: no American had to wait three months for a telephone to be put in, or had only three television channels to choose from, or had to watch rubbish piling up in the streets, the dead going unburied or factories open just three days a week because of industrial action and the failure of the command economy….”

(This is, by the way, the best article I have read that explains what is really going on).

The lesson we need to draw? Take a look at history! learn from it. Do not give in to fear and foolishness.

Ben Franklin used to say:

Experience is a dear teacher; but fools will have none other.

There is another way. Choose it, America!

This is a continuation from my last post about the real issue of Socialism and what that means.

Here is another story from my years in Europe. I was working in Vienna with a man who had been visiting churches in Eastern Europe (then communist) countries since the days of Stalin. He had a story he often told:

A man came up to me in Berlin who had just gotten out of East Germany, having escaped like many East Germans did. I was preaching in a church there and he wanted to make a comment. “Do you know what the difference is between Communism and Christianity?’ he asked? “No,” I answered. “Communism says - What’s yours is mine - Christianity says - What’s mine is yours.’”

I have often thought of that simple, profound statement, when sorting out any sort of Socialist agenda in government. It is a root issue, when you think about it.  It is all about control. It is also all about boundaries, who owns what, and who has rights to what.

The Socialists (and the Communists as well) often launch their campaigns with high ideals. “It is all about sharing!” They will say. “The goal is that those who have share with those who do not have!”

Noble words.

I am all for sharing. Christ Himself told us to give what we have to those who do not have and to take care of the poor. I have never seen more generous and effective people than those who believe and follow those words with their hearts.

But with Socialism, it is about more than that. It is about who makes the decision that I will share. Is it I that make the decision that I will share and how much I will share; or is it the state that decides I will share and how much?

That is the root issue.

Yesterday in North Carolina Barak Obama made a speech in which he said:

“He’s called me a socialist for wanting to roll back the Bush tax cuts for the wealthiest Americans so we can finally give tax relief to the middle class. I don’t know what’s next,” Obama said at a rally at the Halifax mall here.

“By the end of the week, he’ll be accusing me of being a secret communist because I shared my toys in kindergarten. I shared my peanut butter and jelly sandwich.”

Obama misses the point. When he was a kid HE decided to share his peanut butter sandwiches and his toys. That is noble. That is generous. But what if the school had MANDATED that he share his food and his toys? That would be different. That would be Socialism.

What if Obama had said, ‘When I was a kid, I shared Joe the Plumber’s peanut butter sandwiches and toys with the other kids in school?’ That is VASTLY  DIFFERENT.

Think about it.

On a side note, I promised yesterday to sare a great joke the Russians used to tell about Socialism and Capitalism. I’ll move that on to tomorrow. The Obama quote came up first and I couldn’t pass it up.

Stay tuned.

Since the political campaign season has finally gotten down to some real issues approaching underlying philosophies of candidates (and parties), the time has come for me to speak out on Socialism. There is a good chance our government and society might take an abrupt turn to the left in the next couple of years and we need to get ready.

Having spent a number of years living abroad and traveling in Communist and Socialist countries, I have seen a lot and heard a lot from those who already tried ‘the experiment’.

There is no better answer in a debate than real experience, is there?

You might argue that no one in this campaign has really come out and claimed to push socialist philosophy, but any student of history or philosophy will readily admit that one side is more prone, shall we say, to socialist leanings than the other. That this might be called ‘progressive socialism’ or socialism ‘light’ is not the issue. The real issue underpinning it is the underlying philosophy that leads to a socialist understanding of government, business, and cultural life.

Add to that the huge risk we just took as a nation by nationalizing a good part of our business infrastructure and the risk is suddenly enormous. It must be handled exactly right, or our children will inherit a government with huge control over business and economic life - hence - Socialism.

There is a lot to say here and this is just the first installment. Call it part 1.

One of my favorite succinct quotes is from Viktor Belenko (Виктор Иванович Беленко), the famous MIG pilot who piloted the Soviet MIG 25 from Siberia to Japan in a bold  (and successful) attempt to give the west an intimate look at the new super-fighter the Soviets had produced to challenge our air superiority at the height of the cold war (1976).

Belenko, like all top level Russian military at the time, had been raised and cultivated with the ideals of the “New Soviet Man,” nurtured in the values of state socialism and impressed with the rigorous studies of Dialectical Materialism, Hegelianism, and numerous other social and historical philosophies clung to by traditional communists and socialists (and most philosophical leftists of our day as well).

The conclusion it all drove him to, however, was that it simply DID NOT WORK.  Something was missing. In the process he decided to flee to the West and take a plane with him.

Enough on the background - here is THE QUOTE: - I love this one -

Belenko met President Ronald Reagan and told him :

“You should start an exchange program where you send 1 million American High School students to the Soviet Union for a year in exchange for 1 million Soviet High School students coming to the US for a year.  The Russian students will return to the Soviet Union incredibly impressed with the country, which will be a good thing. The 1 million American kids will return home as Republicans.”

(I could not find this online but I remember reading it in Guidepost magazine around 2001)

More coming tomorrow - stay tuned. Listen to one of the greatest jokes the Russians used to tell about the Capitalist system and the Socialist system - and so true!!

I love this clip in Its a Wonderful Life where Jimmy Stewart talks to people panicking during a run on the bank. The people did not realize what their money was doing - that it is was invested in other families, other people’s homes and businesses, etc. He was able to calm them down and ends the day with a liquidity of $2.00 which is enough to keep his bank open. From there it grows to small town prosperity.

Our money does a lot more than just comfort us. It is the seed for things around us to grow. Something to think about in these times.

Since this blog is about entrepreneurs, small business and the media - regular people, most of us - I want to write about the economy.  As I write, the debate is going on in the Senate over the $700 billion bailout. Even if it passes there, there is uncertainty that it will pass in the House next time around. Everyone knows that even if it passes, we are in for a long hard slog to re-establish our economy on a real foundation.

People are worried. Why throw money to soak up bad debts banks have, when people are facing potential debt or mortgage payments problems of their own, especially if jobs drop and interest rates rise - as seems sure to happen no matter what congress does.  Even if banks are kept solvent, who is to assure that they will still help out the small businessperson?

I have a little experience and a general philosophy here.  I started my business with family help in 1988, buying a store. The recession of 89-92 hit right after I moved the store to a new shopping center and quadrupled my rent and overhead. It was tough.  But there were good things about it. Businesses had to be smart to survive. You had to take better care of your customers. You had to forge relationships with them. It could not be a semi-anonymous thing just centered around goods and money.  People got a little more serious about life in the hard times. It was not all bad.

Here is a little thinking on banking. My experience in business was with a small business and a locally-owned bank. When I went to get my business loan to buy my business I spoke with the banker for a long time. He explained that his was the last locally-owned bank in Knoxville, Tennessee. He explained the difference between a locally-owned bank and a larger chain bank. Local banks take local money and primarily invest it in the local economy, in giving loans to businesses like mine. There is accountability there. There is a relationship. We are business partners. I would often go over to the bank and just talk, get help, advice and wisdom; not just deal with money. There is a lot more to running a business (and life itself) than just money.

Larger banks tended, he said, to take the local money and invest it in broader, often removed, markets. They would invest Knoxvillians’ money more in the various funds and national or international banking schemes out there. They might make a great profit, but it was not as much by supporting the people where we lived and whom we knew personally and providing them capital to follow their dreams.

I was tremendously struck with the fundamental difference. I had never before realized that every dollar I invested in a bank, even in my own savings or checking account, could either be earmarked to support a vague fund with who-knows-what control over it in who-knows-which place; or it could be put in the hands of my local banker who could be freer to lend it to my neighbor who ran a hair salon in my own shopping center. Or, for that matter, my business.When you boil it down that way, it is very simple.

I became a huge fan of investing locally, and investing in a relationship that provided wisdom, commitment to me and my neighbors as well as liquidity.

Perhaps it it time for the the entire nation - or even the world - to get the grandiose banking schemes out of their heads and return to investing in -and being accountable to - people they can sit down and talk with. Then we can all learn more - about money - and about life.

A new slogan: It’s about the fact that the economy is us - ’stupid

This Google “Monopoly” claim the traditional media is throwing out there simply will not leave me alone.  Here’s a starter:

Newspaper Group Slams Google-Yahoo Ad Deal

Besides the “pot calling the kettle black” aspect of it all, the worst part is that the local newspapers (they are the ones getting hurt the most by Google AdWords) are screaming bloody murder because the Google ads WORK so well for the small businessperson.  There is a lot of jealousy there because the vaunted classified ads from newspapers’ heyday no longer work for the small businessperson as they once did. Not to mention that the local newspaper used to be the monopoly in that area (see my previous post).

Bear this in mind, though newspapers stopped pulling a decade ago as they once had for many businesses and the readership demographic got older and older, the price never stopped going up!

Many - most - small businesses (I was a retailer in those days) simply stopped paying it and left the papers. Why?

It did not work.

Small businesspeople have to eat. They have to pay employees who have to eat. It HAS to work. That is business. That is life.

Now read with me this statement that galled me so much this week from the article above:

The deal could adversely impact the economy and the newspaper business in at least three ways, according to O’Reilly. Less competition in the online advertising space means less revenue, according to WAN. “The proposed deal will fatally weaken Yahoo as a competitor for these deals,” according to a WAN communique on the issue. “Advertisers will increasingly migrate to Google since they will see diminishing price advantages to advertising through Yahoo. Yahoo will then have fewer of its own ads to serve and therefore less ability to offer a better deal than Google.”

This decreased revenue will then lead to increased costs, WAN said. The majority of traffic to news Web sites comes from paid and natural search through search engines….

All this will lead to a greater dependence on Google, WAN said. “By handing Google control of up to 90 percent of paid search and content advertising, Google will exert tremendous power over both newspapers’ ability to reach readers and their ability to generate online advertising revenue,” the group said.

Did I read that right?

The reason that the Google-Yahoo deal is bad is that it will decrease the competition for Google so that Google can then raise advertising prices for advertisers (read-small businesses) - (or raise the paid search costs to the newspapers themselves, which increasingly have to resort to Google paid ads to get people to their own sites ? They don’t even know how to optimize to get the free, organic search traffic when they have thousands of pages of content and should be pulling them in in droves - for free!

- Don’t get me started.

That sounds like a blatant admission by newspapers that they have lost the ability to get an audience by themselves. Add that to the fact that they cannot deliver the proper demographic readership to small business advertisers and they are complaining because Google (and increasingly Google-Yahoo) CAN?

Did you catch that line? “Google will exert tremendous power over both newspapers’ ability to reach readers and their ability to generate online advertising revenue.”

It is called competition. It is not about newspapers’ “revenue.” It is about small businesses living or dying.

Radical concept.

I thought the idea was to invent a better mousetrap? Did I hear it wrong or was the saying that the world would then beat a path to your door?

Sounds like the newspapers are wasting their time trying to barricade the path.

Oh, by the way, neither Google nor Yahoo “set” the prices for paid search. It is an auction. The market bidding sets the price.  And that same market that invented the Googles and the Yahoos, if it gets too expensive or the ads stop working, can invent other solutions! The Internet makes it pretty easy.

That is what hurts the newspapers the most. Everyone has a press now.

Come to think of it that same marketplace also invented newspapers, once upon a time.

I really do love newspapers.    See my other posts.

But it is high time for the marketplace to reinvent them.

Search. (Drum roll).

Social Networking. (Louder drum roll)

Everyone knows by now that Search - especially Google AdWords - is taking over billions of advertising dollars and delivering fairly recession-proof results to millions of small businesses.

Steve Rubel on Micropersuasion.com makes the startling point that not only is Search rocketing in dollars spent but Social networking will soon be doing that as well (we have been asking how?).

Here’s how - because Social Networking will soon be combining the power of search with the astounding popularity of connecting with other people on the social networks. Once that happens - once the database of intentions is mixed in the ’search’ activity with the desire of the masses to connect - advertisers will have the scent and can deliver their ads on target!

Look out, traditional media, one more time!

I well remember the days when people were pooh-pooing search engines. “Yea, they do some neat stuff but they will never make any money…” How many times we heard it.

You don’t hear it any more. Instead, what you hear now is “Social networking is popular but it will never make any money…”

Only the critics don’t say it as loudly as they did… maybe they learned something.

Read Steve on this one - worth reading.  How Search Will Revolutionize Social Networking.

http://www.micropersuasion.com/2008/09/how-search-will.html

Interesting headlines lately about the words Google and monopoly - from the media - of all people!

I was somewhat associated with the newspaper business for a while and realized from the inside that many of the problems newspapers face come from the fact that they haven’t adjusted well to losing their ‘monopoly’ in the local marketplace.

This is especially true with small business advertising and classified ads.  They had the monopoly because they were the only ones who could deliver consistently in that marketplace for a long time. They had it for decades!

Now it is gone. Local businesses have so many other ways to play in the marketplace - and win!

Suddenly everyone is so concerned that Google is going to get a monopoly like that. Why? because Google can deliver.

For those same small businesses.

But so can many others on the Internet. Everyone owns a press now. As strong a player as Google is, it is still a MUCH more level playing field out there than it was for years - or has ever been.

Read this from the Buzzmachine, a blog by Jeff Jarvis.:

Except the issue isn’t that Google is a monopoly. It’s that Google has become the marketplace. It where we all go for information. It’s where advertisers go for us.

It’s no different from a newspaper. Even when there were two papers in towns, one of them was the marketplace for homes, cars and jobs. That allowed the paper to set rates as high as the market could bear, which was very high…  read more

Lately I’ve been reading Jeff.  He is a true media expert, having worked with and even started some of the most significant media channels in recent times (such as Entertainment Weekly).  He is a very interesting writer and he knows what he is talking about.

Search marketing - that amazing ability that the Internet brings to us to allow the smallest entrepreneur, advocate or person selling anything, to be found, continues its powerful advance in our society. 

I am very glad.

I wrote already about John Battelle’s book “The Search” and his use of the phrase “database of intentions” to describe what Google and other search engines both offer and garner.” That phrase keeps working on me as I think about what is happening in the marketplace today.

We are able to now match ‘intentions’ with amazing acuracy, across the country, across the world, and across town.

Think about it: I ‘intend’ to sell my car. I know its strengths and weaknesses. I also know its value. Someone else ‘intends’ to buy a car, with a value in mind similar to that of my car. They also ‘intend’ to get a car with similar strengths as mine offers. If I am honest and transparent in my post, I also communicate its weaknesses and the person on the other end decides if they are sufficient to thwart the other matchup of ‘intentions.’  A deal is made and sealed. It may well have cost me little or nothing. The buyer had access to an amazing array of information, both from me and thousands of others.

There was a lot of help in matching up the ‘intentions,’ thanks to the incredible power of the “Databases of intentions,” the search companies.

Compare that to traditional small marketing. I want to sell my car. About my only choice to do so myself previously was to buy a limited space small classified ad in a newspaper or shopper. I cannot describe much due to the cost of the space. The available people to buy, those with possibly-matching ‘intentions’, are far fewer. They have to scan hundreds of used car ads to find out if there is a possible match. It was a much different, and poorer, marketplace.

Multiply this effect by tens of thousands of industries, hundreds of millions of people and many  billions of dollars. You get an idea of what the power of “SEARCH” and the matching of intentions has and will have in our business world.

And as the databases get better - the people learn to use them more efficiently, both buyers and sellers - our economy is becoming a much more efficient fullfiller of intentions.

It is happening at lighting speed.