Coronavirus

When Businesses Die, Bringing Back Their Services Won't Always Be Possible

Event production is one of the less visible victims of the virus. Recreating their services when such companies die won't be easy.

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U.S. economic output is down around 29 percent over the past month, and as The Wall Street Journal anticipates, we likely haven't seen anything yet: so far that "doesn't consider how much output will be further lost due to additional demand-side drops from higher unemployment and the loss of household wealth on household and business spending."

The short-term loss in economic activity of the past month has been three times as large as after 9/11, with over 700,000 jobs (almost certainly undercounting what we'll find in another month) disappearing as the virus spread and businesses which depended on people being near each other were squashed.

Many American businesses, not to mention households, can't ride out months of enforced lack of income solvent and ready to roll back to action on the other side of the pandemic.

The number of moving parts in our economic engine is vast; one among many grinding to a complete halt is event production, in a world where people just aren't meeting anymore. You know, the people who make sure all the equipment and chairs and tables and poster boards and lights and sound equipment and displays all show up and work properly at the same time they are needed. It's the kind of unsung entrepreneurial effort that keeps our normal world quietly and unobtrusively humming.

Jobs in this space have disappeared in the past month. It's an industry, reports the Washington Business Journal, that overall "employs nearly 6 million people and generates $249 billion in labor income nationwide," according to a 2018 report from the Events Industry Council.

For now, none of those events are happening and none of that money is coming in. From roadies to production companies, the industry is on the ropes—an industry that claims to support "more jobs than oil and gas extraction, telecom, automobile, food, chemical and machinery manufacturing combined."

Denis Egan ran an event production company simply named "Event Productions" out of Alameda, California, across the bay from San Francisco since 1994. By the end of January, he was seeing signs that some events he was booked for around the University of California San Francisco were being axed. Then, he said in a phone interview, "everything started canceling and canceling. It got worse and by March—well, we didn't have a single event in March—and everything gets canceled as far as the eye can see."

His business was on the smaller end of his field, in better times doing 100 or so events a year, with eight regular employees, a union operation, setting up tables and their scrims, poster board displays, exhibit displays, chairs, and the other accoutrements for meetings of groups such as the American Society of Radiologic Technologists, Phillips Pet Food & Supplies, the New Living Expo, and confabs of colonoscopy professionals.

Setting up equipment for an event isn't just about what happens on the day of the event. The business needs to have all the things the event needs, and the dollies, forklifts, and trucks required to move them into place where and when needed, then get them out, with no room for tardiness. The events happen when they happen, and their facilitators must work flawlessly and be perfectly stocked.

Egan's operation thus needed a huge warehouse space, for which he can no longer afford the $20,000 monthly rent, with all his anticipated jobs canceled through September.

Egan isn't optimistic that trade shows, corporate events, concerts, or "any large groups of folks," will come back soon. "Things might be back to normal in a couple of months maybe for trucking or manufacturing where [workers] can stand 6 feet apart," he suspects, but "I don't see meetings, trade shows, concerts coming back until there's a vaccine."

The bigger companies in the space, Egan believes, will likely "still be around at the end of this. They have reserves, banks will back them." But smaller independents may well be gone. His business definitely will be.

His operation, he says, was among "the smallest level of independents who do this sort of work," typically grossing in normal years between $2 and 2.5 million, setting up at places like the smaller halls in Moscone Center in San Francisco or the San Jose Convention Center, packing the trucks the night before, showing up with the material and manpower before sunrise to get the event space ready for the attendees, then getting it all out and back to the warehouse by the end of the day. It's a lot of grueling physical labor and brain-bending logistics, and nearly all of us who enjoy it as attendees of conferences, conventions, or trade shows never have to think about it for a second.

Everything Egan had to keep for his clients' needs has to be liquidated now. These goods might end up taking in pennies on the dollar of his initial cost to obtain the items.

Those of us who want to be optimistic about the future of the economy can calm ourselves by remembering—rightly!—that all the stuff of our actual wealth will remain on the other end of this. Why get so disturbed by the economic disruptions of today when, long-term, all the knowledge, techniques, manpower, physical capital—the actual stuff by which we meet our needs and improve our lives—will still exist?

But Egan's story makes clear that while after he sells off his stock, dozens of people who just need some chairs, tables, carpets, dollies, trucks, forklifts, or pipes and drapes (to form temporary walls) will have them, but the usefulness of the collection in meeting the needs of event organizers will be gone. For this particular set of stuff, that concentrated ability to meet a specific set of human needs will never come back.

Egan will be OK—he's near retirement age and he owns a home free and clear. His workers are now out of a job, though, and with no industry in which to expend their particular skills and knowledge. And he worries some of his clients won't be able to use the remaining huge operations for whom, say, a mere $80,000 job isn't worth bothering with when they might have bigger conferences to put on that will earn them more money.

Tony Villarreal, who owns a Michigan stage audio and production company, was quoted in The Oakland Press, "holding on to our staff and equipment to weather the storm is a must" to have any hope of a functional business on the other end. Egan couldn't afford to do that, so he and other entrepreneurs who needed to be able to spring back into action with their specific objects and skilled workers will see the value their human and physical capital represented scattered to the winds.

NEXT: At-Home Coronavirus Testing Kits Might Be the Key to Ending Our House Arrest

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  1. If the coronavirus shutdown was crushing college administrators or nonprofit executives or green energy lobbyists, it would have ended last week. Instead, it’s mainly service workers and small business owners who have been hurt, and they’re not on television talking about what they’re going through. You need to look closely to see their suffering.
    — Tucker Carlson

    1. Hell, if it even impacted the media, it would have been over. But in fact the media is benefiting from this nonsense, as everyone is locked at home and must turn on the tv for any news.

      1. It will eventually filter to the media, they make money in advertisements, sales are horrific for pretty much everyone right now. the second the first jorno is laid off this is the day it ends.

      2. Most people under 70 get their news online, not from TV. And I don’t see how the media is benefiting from this. You don’t think reporters have to be around other people to do their job? I mean look at Reason, for example. When was the last time Robby did one of his insightful interviews?

        1. You dont think people are reading more news than usual?

          1. They may read more but I am betting it is from news consolidation sites such as RCP. I doubt newspaper subscriptions have increased much, and the occasional purchase of individual paper is probably way down.

        2. “And I don’t see”

          To the surprise of no one, eunuch

    2. Give it a few more weeks and these folks will be hurting too.
      Many non-profits will find contributions drying up if they aren’t in the “helping victims of coronavirus” space.
      Colleges may not re-open until Fall so fewer admins and teachers needed as more parents find they can no longer send Sean and Taylor off to college.
      And Green energy lobbyists? Try to sell scaling back our economy now that everyone has gotten a whiff of what they are selling.

    3. He pushed for this, fuck him.

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  2. Imagine the losses to the ranches in Moonlight Nevada.

    1. I can think of plenty of things you can do with a hooker while staying six feet away from her.

  3. I’m not sure such services are ever going to be needed again – since “social distancing” seems to have worked so well for the coronavirus, it’s going to be seen as a great idea for any and all commonly transmitted diseases so I’m expecting to see it codified permanently. All group meeting places – movies, bars, restaurants, entertainment facilities, churches, schools – will be required to limit their crowd capacity and their seating arrangement so as to maintain a 6-foot distance for everybody at all times. Additionally, expect any employee dealing with the public or handling any product intended for the public to be required to wear masks and gloves at all times and thoroughly scrub their hands and faces every hour. It’d be a good idea for everybody to do the same, but out of an excess of benevolence, the government will graciously only require it for commercial interactions.

    It’s possible, although not necessarily probable, that handshaking will be outlawed, hugging will be a felony, kissing a capital offense. You don’t want to know what spitting on the sidewalk is going to get you.

    Sure, there will be some greedy rich people complaining that reducing the capacity of their businesses by 50% or more is going to make it impossible to maintain a viable business, but if it saves just one life it’ll all be worth it. And who really needs theme parks and beaches and concerts and casinos? Just stay at home tethered to your computer and you can enjoy virtual space-sharing just as well as the meat-space interaction. See you in Hell!

    1. Another one Demolition Man called 25 years ago

      1. That and the disappearance of toilet paper and the need for the three seashells.

    2. >>expecting to see it codified permanently

      like how everyone goes shoeless through the scanner at the airport forevermore because of one moron who tried to blow up a plane w/his shoes

    3. I read that most laws against spitting in public date from the 1918 Spanish flu pandemic.

      1. TB

  4. That’s just one industry out of many that’s tanking. Granted, it wasn’t the government who tanked them, people were cancelling events long before the first lockdown was ordered. But the government isn’t helping with its heavy hand. Dividing the economy into “essential” and “useless” is bullshit. Many of those non-essential industries might take a year or more to come back. Some might never fully come back at all.

    Doctors and nurses need shoes. But how do they get shoes when making shoes has been outlawed? Eventually even Amazon’s limitless warehouse will run out of shoes and then everyone will be barefoot.

    I myself need a haircut. Seriously in need of one. But I can’t imagine my next haircut happening for another two months at a minimum. Even when barbershops become legal again, the line to get into them will be horrendous. Barbers rent their stools from the shop, but the shops will have closed and the barbers moved on. The idea that barbershops will reopen as is nothing has happened. is bullshit.

    1. My barber also fixes clothing. I dropped off my favorite jacket to get a new zipper put on it, and then the shop closed. I don’t have her contact info. Sucks.

    2. On the other hand, Brandybuck, remember what happened when the government declared war on controlled substances. Millions of Americans found ways to circumvent the law. Ditto: Prohibition. Remember how well that worked out?

      My guess is after a few more weeks of this, we will see black markets begin to emerge in services like haircuts and the others you mentioned. I already know of one person who had someone come to her house and agree to do hair coloring and nails on the sly, while wearing gloves and a mask. Don’t be surprised if that starts happening more and more as Economic hardship starts to bite.

      1. That’s my guess too. People will gradually break the lockdown, one by one, and if stopped, will always have the excuse of “groceries”, even if they just buy a small bag for evidentiary purposes. If stopped while visiting a client, they are delivering groceries.

        People will get bolder. Cops will get bored and not bother. Quasi-essential stores will open an hour or two once in a while, selling both essential and unessential goods. The barber will come back to his shop for maintenance and cleaning and checking inventory.

        It’s idiotic to think people will remain indoors except for weekly groceries and monthly prescriptions.

        1. I always say I am going home after grocery shopping. No grocery bag? All I needed was toilet paper, and they were out.

          Sort of like “I have no recollection of those events as you have described them, Senator.”.

    3. I had my wife shave my head for this reason. Also, since my hairline is retreating faster than the French in front of a German invasion, it was also a matter of accepting reality.

  5. I worked in printing (laid off a few weeks ago).

    A few of our clients had materials printed for trade shows. Some of it was promotional material to attract people. Most of it was informational material to sell stuff. Not the biggest part of our business, but nothing to sneeze at either.

    The problem with shutting things down is that there is a knock on effect that is hard to quantify. Anyone can see the direct effects. But there are usually several other businesses that have ties that no one considers. Putting things back together will take a lot more time than shutting them down.

  6. Everyone has good anecdotes about their particular corner of commerce. That’s what the politicians have no practical experience in, and can’t fathom no matter who tells it to them. Trump at least has business experience, and knows hotels need low level workers; I bet not even 10% of politicians have that much.

    What none of them, including Trump, understand is that jobs are not just income sources; the produce things too. All that production is lost. Money itself is useless and its real value is the goods and services it can buy. You don’t borrow money to have it, but to buy things. All the money in the world won’t hep when the products are not there.

    The so-called unessential businesses are just as essential to an intact economy as the others. But they are unseen by the cronies and mercantilists.

    1. One of the things I see from the agricultural market is people criticizing the destruction of milk despite the stores limiting milk supply. Leaving aside the issue of milk boards and other regulations, what people don’t understand is that restaurants and schools made up a large percentage of demand. The lines to produce these products, in sizes and containers specific to those needs, is not easily retooled to make half gallon and one gallon containers that people purchase for private use. It is like everyone expecting Ford and GM to start producing ventilators immediately, people don’t understand how production lines work or how long retooling takes. Additionally, the don’t understand how the shutdown of production lines impacts commodity producers that need to sell product. And finally, the FDA and states make selling milk directly to the consumer almost impossible (and often illegal), if the dairy is even set up to do such. Most are not.

      1. Explaining this to people is surprisingly hard (although, if they are somewhat intelligent and open minded, they get it after a while). It’s not always government regulation that plays a role though.

        Another example is eggs. Most all the eggs one sees in a retail market are Grade A or AA. Grade B eggs are perfectly safe, but are cosmetically “undesirable” — and they tend to end up being turned into powdered eggs or pasteurized whole liquid eggs in big bags that are used commercially (such as in baked products) both because they are cheaper and require much less labor. The processing line for bagged or powered eggs are not of use in the retail “by the dozen” supply chain. The processing line for “by the dozen” supply chain (i.e., retail) is often highly automated (inspection, sizing, and putting into cartons) and probably was largely running close to capacity before the demand for retail eggs went up. Adding equipment just to pump up the retail egg supply to accommodate an increase in home use for perhaps just a few months makes little business sense.

        Another example is TP. The commercial and retail supply chains are quite distinct and manufacturing of each type of product have dedicated machinery. As well, since the need for TP is so consistent (roughly increases predictably with population growth), manufacturers had little reason to accommodate “surge” demand in one channel so they apparently ran their plants 7/24 to avoid having expensive capital tied up idle (as well, perhaps, as “startup” time and energy after each “idle” shift). Commercial TP tends to have high recycled content and, unlike the retail stuff, isn’t “fluffy, soft, perfumed, quilted, or particularly absorbent. Much of the commercial market is for giant rolls (think 2000 feet) that retail consumers have no place for. As well, commercial TP rolls tend to be individually packaged and put into cartons while retail TP ends up packaged into packs of 4 or more which are encased in plastic — and sometimes then put in cartons. The equipment to produce the commercial TP and to produce the retail TP are likely quite different and not trivially and cost effectively adapted to convert from production of commercial TP to retail TP – esp. when the duration of the need may be limited. As well, at least one major manufacturer of TP is mostly focused on the commercial market so doesn’t have much of a retail supply chain.

        1. “…It’s not always government regulation that plays a role though…”

          Yes, it is.
          People absent government interference, would start trading again when they began to see the effects.
          You can’t do that now, thanks to low-watt bulbs like Newsom who has no idea how an economy functions and will keep things closed because it make him feel powerful.
          And then, he’ll blame the disease, which is well on the way to killing, oh, several hundred people, for the depression HE cuased.

  7. This article is on point. My wife’s business, among other things, has worked in the event logistics space for 25 years. These companies are amazing. Everything that can go wrong, does, and these teams of people are just masters of improvisation.

    As they break apart, and know how is lost, it won’t be easy to recreate them. Perhaps the NFL will subsidize its team. But most of the people will end up finding other employment.

    My wife’s company did some work for Golden Voice @ oldchella/desert trip. GV wasn’t really prepared for 3x Coachella and that was with years of expert know-how. Future events, when they come back, will be disasters.

    I guess the Fyre Fest is the counterfactual here. That’s probably more in line w/ future expectations.

    Thanks, Gavin Newsom!

    1. “Thanks, Gavin Newsom!”

      ‘Fuck you! I feel like a KING!’
      Gavin Newsom

  8. “Egan’s story makes clear that while after he sells off his stock, dozens of people who just need some chairs, tables, carpets, dollies, trucks, forklifts, or pipes and drapes (to form temporary walls) will have them, but the usefulness of the collection in meeting the needs of event organizers will be gone. For this particular set of stuff, that concentrated ability to meet a specific set of human needs will never come back.”

    With all respect, Mr. Doherty, you seem to have lost faith in creative destruction itself–which is the means by which progress happens. This isn’t exactly what we think of when we think of creative destruction–but it might as well be. Certain occupations go extinct when they become unsustainable–just like certain species and for the exact same reasons. But companies that set up and tear events down are in no danger of extinction–and certainly not because of their lack of scale.

    I’ve thrived in a commercial real estate development market where we can take on projects that aren’t big enough for larger developers because the big guys need to perform on a larger scale. Making a 60% annual profit for them isn’t enough to bother with the deal if the deal is only on $3 million in equity. They have billions they need to put to work every year, and 60% profit on $3 million doesn’t even register as a blip on their radar–it’s a distraction and a waste of time to them!

    Yeah, when the market tanks, it isn’t the big guys that go under. And us smaller fish, we have to find somewhere else to go or something else to do when things go bad. As the markets right themselves, however, opportunities abound. Turns out people still needed commercial real estate after 2009. It’s just that, nowadays, with the way the market has changed, instead of building more retail and single family housing in Southern California, the market wants us to take old empty shopping malls and turn them into mixed use retail, office, and residential apartments.

    I’m sure the people who cater to smaller events are having the roughest time of it and will go out of business the most because the smaller events are likely to be cancelled first and it’s likely to stay that way for the longest. As the market recovers, however, there will once again become an opportunity for entrepreneurs catering to events that are too big for companies to handle themselves but too small for the big guys to care about–just like there is in almost every industry. Just because hard working, smart people are pushed out of business by market forces, however, doesn’t mean they starve to death. The best people working for that guy will be among the first to find new opportunities. I went to Mexico for a couple of years and found opportunities there.

    This is Libertarian Capitalism 101 stuff. Even if this virus really did mean the end of live events like the horseless carriage meant to the end of the buggy whip industry, ingenuity, hard work, and persistence will still be valuable and relatively rare. Those without those qualities have plenty to worry about over the long run–a booming economy made employers more willing to overlook their shortcomings than they would have otherwise. During disruptive events like this, however, when the investment world is reshuffling its investment priorities, it’s a huge opportunity.

    That’s all it is: a scary, frightening, nauseating, exciting, and exhilarating opportunity, and ten years from now, I bet the people who used to work for this guy will be glad they aren’t doing that anymore. Most will have moved on to better jobs making more money. Seeing people stay at a job when they should have jumped ship a long time ago is probably the most common mistake people make with their careers, and I’ve worked at more than one place where most of the people were let go–only to see those who were let go thrive the most.

    This has all happened before, and it will all happen again. Marx thought it would turn us against capitalism, but what it teaches libertarian capitalist to do is to embrace creative destruction as a force for good in the world.

    1. This isn’t creative destruction.

      https://cafehayek.com/2020/04/destructive-creation-differs-from-creative-destruction.html

      To summarize, with creative destruction the creation precedes the destruction. People come up with a better idea and replace what is currently being done. In this case the destruction is preceding the creation, and instead of market forces doing the destruction it is happening by government diktat. .

      Not the same thing.

      1. This isn’t exactly what we think of when we think of creative destruction–but it might as well be. Certain occupations go extinct when they become unsustainable–just like certain species and for the exact same reasons.

        —-Ken Shultz

        This is creative destruction by other means.

        Businesses are being forced to survive a shock, and it may be that those that fail to survive are businesses that shouldn’t survive.

        Having grown so large that you can survive a shock that smaller businesses can’t because scale gave you efficiencies that small businesses don’t enjoy isn’t entirely dissimilar to fish that have grown so large that they will no longer fit within another fish’s mouth is a legitimate adaptation.

        When a business can’t compete on price with foreign exports because they don’t offer value that’s sufficient to justify the higher price, maybe we don’t call that creative destruction.

        It’s the same thing–the companies that fail because of that should fail because of that.

        When a virus comes along and makes a business no longer viable because they can’t withstand two quarters of non-activity, we may not call that creative destruction, but the companies that can’t withstand that shock are probably the businesses that should disappear.

        When the horseless carriage comes along and wipes out the buggy whip manufacturer or Uber comes along and destroys the taxi cab industry, we call that creative destruction–but the conclusions are the same. The businesses that are most vulnerable to that shock are the businesses that should disappear.

        I might even argue that the businesses that are being disrupted by this the most may be the businesses that were already susceptible to shocks for other reasons that you might call “creative destruction”.

        Gannett owns hundreds of newspapers in small towns all over the country. They bought those papers up because their old business models have been failing for years. People go online to sell cars, eBay stuff, Craig’s List stuff, to look for jobs, and to place help wanted ads. They laid off and furloughed their employees at more than a hundred papers. No doubt, the coronavirus made the coming months especially difficult for them because hardly anyone wants to advertise during coronavirus lock downs because consumers aren’t out shopping anyway. The business they were in was already highly susceptible to something like the coronavirus.

        Same thing happening with AMC Theaters. why pay $20 bucks for tickets and $5 for a soda to watch a movie in one of their theaters, with idiots around me talking, etc. when I can catch the same movie on Vudu two weeks after it leaves the theater on a gigantic affordable screen at home, the food is better, and no one is talking during the movie except me? Sure, the coronavirus means that people are staying home, anyway, and no one will probably feel like sitting in a gigantic auditorium full of other people for long after it’s safe, but if the coronavirus puts the last nail in the coffin of the community movie theater, it will be because they were vulnerable given things that were already happening–cheap TVs, streaming, etc.–things that you would refer to as “creative destruction” explicitly.

        If globalization has made us more susceptible to viral outbreaks, and some businesses that deal with crowds, like those that set up and tear down the infrastructure for public gatherings, are more vulnerable to economic downturns because of that, I don’t know if you want to go on saying that this economic downturn wasn’t really a function of someone coming up with a better idea, but it might as well be creative destruction–whether you want to call it that or something else.

        1. I too was surprised that this viewpoint was not voiced in the article – this being Reason and all.

          I think of the current situation as being rather like a modest size meteor hitting the Earth changing the environment significantly for a couple of years. And some businesses will fold, some will adapt, and some new ones will be created. Evolution isn’t just for amebas!

          1. That’s exactly right.

            Darwin was reconciling Adam Smith with Malthus aboard the Beagle, and two recently diverged species of birds on the beach showed him how Smith’s specialization trumped Malthus’ observations about limited resources. Darwin’s birds that flourish despite unforeseen events are like businesses adapting to withstand sometimes violent and unforeseeable threats. And they don’t require a central planner any more than Darwin’s species adapting to changes in climate or violent weather necessarily requires a central planning God.

            It would be unreasonable to assume that industries that are threatened by pandemics in the future, like this, will fail to innovate new ways to protect themselves from future pandemics. If entrepreneurs can’t find effective ways to screen passengers that might be contagious, lower the likelihood of passengers on airplanes infecting each other, etc., then there are other ways that, say, an airline might protect itself. Airlines used to be highly subject to oil shocks. A slew of them would go bankrupt in the aftermath of an oil shock, so the survivors started hedging their bottom lines by maintaining long positions on oil or hoarding the stuff when prices seemed low.

            Because the future is uncertain doesn’t mean risk can’t be quantified and mitigated. No doubt, smaller players with shallower pockets and smaller scales have a tough time dealing with these kinds of shocks, but larger or smaller scales have always come with various advantages and disadvantages since before that meteor wiped out the dinosaurs. There’s nothing new here. Whether the shock comes from innovation, cheap imports flooding the market because communism fell, or an unforeseen tornado, is mostly just about some people wanting to find someone to blame.

            The real point of creative destruction is that government has no business squandering the hard earned proceeds of other people’s profitable activity and squandering it on businesses that can’t sustain themselves. If you can’t beat ’em join ’em go to work for your former competitors or find something else to do. And in the aftermath of this, there will be plenty of new opportunities.

            Disney’s parks are getting crushed by this. Disney+ just shot past 50 million subscribers–in no small part due to acceleration of subscriptions because people are looking for something new to watch during the lock downs during the coronavirus. Restaurants that find ways to make food that’s extremely well suited for delivery are likely to find themselves doing well after this is over–even if others can’t survive. It’s not like some of these restaurants were ever expected to have a long life anyway.

            The Perry Group study concluded that most restaurants close during their first year of operation. Seventy percent of those that make it past the first year close their doors in the next three to five years. Ninety percent of the restaurants that are still operating past the five-year mark will stay in business for a minimum of 10 years. The Restaurant Brokers’ study, the only one to make a distinction between chain and independent restaurants, concluded that up to 90 percent of independent establishments close during the first year, and the remaining restaurants will have an average five-year life span.”

            https://yourbusiness.azcentral.com/average-life-span-restaurant-6024.html

            1. I meant to close off that strike-through tag.

              Ugh!

              1. See below; your claims are bullshit.

    2. Broken windows fallacy.

      1. The broken windows fallacy says that we should break the windows in our building because when the government fixes things unnecessarily, it’s good for the economy because it provides employment and an infusion of cash amid a liquidity crisis.

        Creative destruction isn’t saying that at all.

        It’s saying that fixing windows on a building that’s fallen over and broken is a stupid thing to do. And getting rid of buildings that can’t stand on their own is a necessary part of the process of replacing them with something that can stand on its own.

        1. Creative destruction obviously implies that a business was destroyed by being out innovated, as you point out, yet ‘innovation’ or lack thereof has nothing to do with why some businesses are being destroyed right now today.

          A government enforced lock down that puts you out of business is not creative destruction, it’s wanton destruction. There’s a bit of a difference.

          Should the government also shut down, say, Hospitals in the hope that they’ll innovate after being put out of business?

          1. “Creative destruction obviously implies that a business was destroyed by being out innovated, as you point out, yet ‘innovation’ or lack thereof has nothing to do with why some businesses are being destroyed right now today.”

            Like I pointed out above, I’m not sure that’s true. In some cases, the coronavirus is just the straw that broke the camel’s back. In other cases, what difference does it make? The justification for bail outs remains invalid regardless of whether the failure was due to a lack of innovation or an unforeseen event. The argument for letting companies that can’t compete because of a pandemic fail and die if investors think they aren’t worth saving remains just as valid regardless of whether the business failed because of a hurricane or poor decision making, as well.

            1. Sorry, Ken. You could as well claim Lenin’s closure of businesses in 1918 as ‘creative destruction’.
              Schumpeter never fell into that fantasy. Government closure of businesses is “destruction” and has nothing to to with “creative.”

            2. Look at it from utility and from principle:
              First, as is often mentioned, IF an innovation was a really good idea, there would be no reason to use government coercion to promote it, either by subsidizing it or causing the failure of competing firms, as it happening here.
              Secondly, Sevo’s Law: Any time a third party sticks its nose in a free exchange between to free agents, one, or likely, both of them loses.
              This is not speculation; it is an obvious derivative from the self-evident statement that a trade between two free agents means both get more value than they gave; f they hadn’t both profited, they wouldn’t have done so. Every such exchange increases the wealth of humanity.
              The government’s nose is involved here to the detriment of most every trade (millions per day); humanity’s wealth and your (and my) welfare; we are headed for very bad times. VERY bad.

  9. All our wealth will still be here, but it will be owned by the banks.

    1. The song was already written;
      “All the gold in California is in a bank in the middle of Beverly Hills, in somebody else’s name”

    2. So, a debt for equity swap. What’s the overall effect on the economy, some deflation?

    3. “All our wealth will still be here, but it will be owned by the banks.”

      Bullshit.
      Wealth =/= money. You do not understand what produces wealth.

  10. The assets, the expertise, and the demand will still be there, so the business sector won’t go away, it’ll just have new owners.

    1. Yep. Reminds me of all the people who say that if the Feds hadn’t bailed out GM and Chrysler it would have been the disappearance of most of the domestic auto industry. As if all those assets would have vanished.

    2. “The assets, the expertise, and the demand will still be there, so the business sector won’t go away, it’ll just have new owners.”

      Doesn’t work like that.
      Disperse the people who have worked together, and you’ve probably cut profitability in half.

  11. Our company employs 82 people. It’s a managed service business. If the lockdown stops by May 1, we should be okay. If the lockdown is extended to the end of May with no hard – target date to quit the cancellations will start rolling in. If by the end of June we’re still locked down we start furloughing, once that starts the wheels stop spinning, human capital starts to dissipate, IP is lost. The bitch of it is we spent 12 years building a valuable well-respected business where people liked to work. Overnight because of a draconian shutdown all of that work, late nights, sweating making payroll and finally coming out on top will be lost. That’s a lot of destruction times all of the companies like us. Has it dawned on anybody we now have an unelected bureaucracy running the economy determining which businesses live and die?

    1. “…If by the end of June we’re still locked down we start furloughing, once that starts the wheels stop spinning, human capital starts to dissipate, IP is lost…”

      A profitable company is not simply a collection of plant, raw materials and fungible staff.
      Anyone who has ever been involved in running a business knows that; the others are blowing smoke out their asses.
      In our case, we are scrambling to buy inventory we really don’t need right now, hoping our buys will be sufficient to keep our supply-chain in place.
      ALL OVER A DEATH TOLL WHICH IS NOT GOING TO MATCH THE SEASONAL FLU, FFS!
      Those fucking pieces of shit JFree, Hihn and the lot of them ought to be starved to death at the front of the line; they deserve nothing less.

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