The "lean" economy

There's a school of code-slinging known as "agile programming," which is an offshoot of the "lean manufacturing" pioneered by Toyota in the aftermath of WWII.  One of the most basic tenants is the commandment to "fail fast."  In software, that means getting the most usable features--even in the roughest form--out in front of real users as quickly as humanly possible.  (The terminology is MVP, or "Minimum Viable Product," btw.)

But the most useful part of the "fail fast" mantra is the three-fold assumption that:

1. Failure, at some level, is inevitable.
2. Small, inexpensive failures should be insurance against large, catastrophic ones.
3. Be willing and ready to "pivot" your business model and/or product at the proverbial drop of a hat.

Seriously, it's about as healthy of an attitude toward failure as I've ever seen.  Better yet, it comes from the real-world, rather than "Self-help" woo from the bookstore.

Coming, as I do, from that operational mindset, I have a difficult time stretching my think-muscles around the willingness of big business and government to compound failure by postponing it.  That difficulty is exacerbated by both the money-printing-presses of central banks and the hoarding behaviour of large corporations.  Don Pittis' editorial on "zombie economies" really brought that home yesterday.

Pittis is a little vague on the point of zombie companies in particular.  But what I suspect he refers to, at least in part, is companies buying back their own stock, financed at least in part with artificially cheap money.  Fortune in February noted that large buybacks don't tend to be well-executed by companies for a couple of reasons:

1. They're buying stock at relatively high prices, and
2. They're spending that money in lieu of "riskier" R&D.

That sets up a triple-whammy, should the company's fortunes take a sharp digger.  Firstly, they're now loaded with debt.  Secondly, if they need to sell stock to raise cash, they're now selling it for a net loss.  Finally (and most ominously), they're left with fewer (or no) new products with which to diversify their offerings.

This is about as antithetical to "agile"/"lean" as it gets.  Being too afraid to take calculated short-term risks sets up more consequential dangers in the long-term.

Tragically, what the post-2008 coddling of the investor class has amply demonstrated is that failure does not have consequences--at least not for those who screwed up.  Anyone who subscribes to the notion of the "rational actor" of neoclassical economics (which I don't) has to admit that its vaunted "rationality" breaks down in the absence of market discipline.

Look.  I have a mortgage.  But my interest rate ticking up at renewal time is preferable to the damage that an artificially-induced recession will do to my income.   Six years (and counting) into the post-bailout malaise, it's amply clear that artificially low interest rates are an anesthetic rather than a cure.   Job growth is anemic at best; wages have remained stagnant.   Worse, any incentive to save against the next recession has been severely dented by those same low interest rates--not to mention what banks siphon off as fees.

But, hey, at least no one's calling it a Depression, right? 

Any sane startup or product manager would have pivoted a looooooong time ago.  Yes, I do realise that the world's largest economies (and companies) don't turn on the proverbial dime.  But, looking at the experience of Iceland post-2008, I have to wonder whether letting banks fail and using the bailout money to write off mortgages wouldn't have been the better option.  Short-term pain vs. long-term gain.  That sort of thing.

Plus, you can't deny the soul-satisfying appeal of Iceland tossing its greedy, irresponsible banksters in jail.  Alas, the only way North America could scrape up enough political will for that would be to turn it into a particularly trashy reality show.  Snap to it, Hollywood!