February 20, 2009

Paradigm Shift

Of course, this is the most cliche business advise as any guru would have said this words at least once every time the economic situation warrants such changes to be suggested. I have lambasted it once, which attracted attention of a few other lawyers and business associates when I said the current economic situation was brought about by greed. In the posting titled Appetite for Destruction which is a kind of my criticism of the way people do business taken from a layman point of view, I basically said we should just let the economy to fail although it might hurt a lot of people. This time around, I want to strengthen my argument with a new approach. It might not be original but it is not going to be popular.

I hereby say that we need to go back to simpler time, put our shoulder to the grind, work for every penny, do not take any loan and live as frugally as we were thousands of years ago. No more divisions between the wealthy and the poor. Even if there are, the wealthy should be the leaders that have been elected fairly by all and must first declare their asset BEFORE they are elected and then when they are elected, declare their asset, again and again, year after year. All leaders must be known in the area they are elected. Like leaders of old, these leaders must tell their charges where is the next place to move to economically to ensure they have enough food on their table. No more handouts but they must participate in doing the work or the project like any layman.

How do you ensure that there will be no more bank failures or people going out of work, becoming bankrupt and such? The answers are already being given by personal financing coach like Suze Orman and locally here in Malaysia, Azizi Ali. Live within your means. That's it. Do you really know what this mean? They say, pay everything in cash and don't take any debt beyond the means to pay it. Will this make the bank survive? I don't think so. Banks will be bankrupt in a matter of months. If they keep on selling their products to those who don't really need it and then say to them they can now go on that vacation. Buy that big screen LCD television. Buy that gold and diamond. Or that Louise Vuitton handbags. If you really live within your means, there will be a lot of industries which will go out of business and most of them are the businesses which had the word 'entertainment', 'leisure' and 'luxury' as their tagline.

Brand will be a thing of the past. A steak will be a steak whether you buy it in a restaurant down the street or a five star hotel. Why do you pay a bag that is made with the same calf skin a higher price although it may even come from the same cow or region, but where one is sold in a high end boutique and another is at a factory outlet in Indonesia? How do you finance your purchase? That 'credit' card? Cash from personal financing which you pay months on end? Did you calculate what you can afford before you receive the financing? If bank couldn't convince people to take financing with them, would there be any more banks? Can bank survive if they give out loan just up to the assets that they have. No more overcapitalisation. No more issuing bonds for a promise that they can't keep.

In short, what I propose here is to go back to basic. Ditch that BMW and Mercedes. Sell that big house where there are only the two of you. Go see to that agriculture land you have always wanted to till. Eat what you sow. Know how to plant and keep that chicken. Start back small. Then give that surplus money to your neighbours. Your mosque or your church. Your government through tax and zakat. You will be healthier and happier in the long run.

Will this advice ever be taken seriously? Will I do it myself? Nah.... All these are just pipe dream and wishful thinking. Too modern for our own good. And to proud of it.

See you at the soup kitchen line....


Ratty said...

We may all be going to simpler living whether we want to or not, unless the economic troubles change for the better.

kruel74 said...

Simpler might sometimes be better

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