P2P Lending: Lending Club Review – Follow Up

Posted on March 15, 2013 by admin

Back in June of last year I wrote about Lending Club.  It has been about 9 months and I am ready to offer my experience and opinion about the site and its value proposition to the average Jane and John Doe.

Since June of 2012 I have invested in 40 notes off of the Lending Club Note Trading Platform.  I used the criteria that was set out in my original post, which included loans that were never late and had fewer than 36 payments left.  I setup automatic withdrawal for $25 a week during the investment period.  A small amount, but it will illustrate a point soon.

Out of the 40 notes I had 1 default, 4 loans paid off early and 35 current with payments being made.  My average (according to Lending Club) interest rate hovered around 8%.

See Below for screenshots:

Lending Club Account Summary as of March 15, 2013

Lending Club Account Summary as of March 15, 2013

Lending Club Year End Statement for 2012

Lending Club Year End Statement for 2012

I will let you look at the numbers to determine if they are acceptable or not.  What I want to focus on are the mechanics of using Lending Club and whether I think the site is worth the time and effort.

As I mentioned in my earlier post, I feel that Lending Club’s Note Trading Platform is merely a secondary market for the originating investors.  It allows them an exit from their investments that would otherwise be illiquid for the next 3-5 years.

I still hold this opinion and my exeperience supports it.  I believe in paying attention to details that some may otherwise ignore, because those details can provide a lot of insight into larger tendencies.  In the caes of Lending Club, I have yet to get a formula from them on how they come up with their yeild to maturity. Strike 1.

As I mentioned in my previous post, the Note Trading Platform is wholly inadequate.  It lacks some basic but important features to allow secondary market investors (that is us John and Jane Does) to do quick and easy loan searching, filtering and investing.  I dont get the feeling that we (secondary market investors) are that important.  Strike 2.

My experiment consisted of depositing $25 a week and then using the funds to buy notes as I could that satisfied my criteria.  With only one or two exceptions, I never bought a loan that was more than $20-30, this was for the purpose of diversifying quickly.  $25 a week is not a lot to invest but I ended up constantly having to search just to find a loan worth buying that was in the targe price range.  The note trading platform does not make this process any easier.

My point here is that scaling this experiment with a more substantial sum would require much more effort and the patience to refrain from buying more expensive notes and losing the much needed diversification. Strike 3.

In doing this quick writeup I noticed another problem that I consider to be inexcusable – Lending Club does not keep activity longer than six months.  Are you kidding me???

In the age of big data and considering the value of this information for anyone who is really interested in digging into the numbers of their investment this is just not kosher.  I see no reason for Lending Club not keeping this data available for their investors.  I can most assuredly bet that they are keeping the data for themselves.  Strike 4.

Lending Club Activity

Lending Club Activity

I have decided to stop my automatic investments and let my remaining loans play out. I love the concept of P2P lending but not the way Lending Club is approaching it.  I feel that their secondary market is a sham that serves more as an exit for the originating investors than it does an actual market for everyone else.

Buyer Beware.

Posted in Arbitrage, Finance, P2P Lending | 2 Comments

P2P Lending: Experimenting with Lending Club

Posted on June 12, 2012 by Jose L. Velez

I’ve decided to dabble with Lending Club’s Note Trading platform.  I am skeptical that the secondary market will provide returns as good as those available to accredited investors who are able to originate the loans.  In fact, I think that the secondary market is going to be rife with bad deals; so this endeavor will be to test my hypothesis, so to speak.

Hο = the median return from notes purchased in the secondary market is less than the median return from notes originated in the primary market.

Now this is not going to be an all out statistical or scientific exercise, I forgot most of that anyway.  This is merely my way of documenting my observations, methods, transactions and results.

Browse Notes

Lending Club has a less than adequate portal (more on that later) to view the available notes for sale.  As of this writing there were a total of 29,594 notes to buy.  That is more than enough to warrant some pre-determined criteria to whittle that down to a more reasonable number.  Lets keep it simple for now, my initial screening criteria will be the following:

Filter Criteria Pre-Filter Count Post-Filter Count
Notes must never have been late 29,594 Notes 18,720 Notes
No notes with more than 36 months left 18,720 Notes 7,875 Notes
Interest rate must be more than or equal 5% and less than or equal to 15% 7,875 Notes 5,433 Notes

 

These 3 simple criteria brought the number of notes down from 29,594 to 5,433 – 18% of the loans.  Now I have a more manageable universe of notes to go through to find the “right one”.

Unecessary Work Involved

Lending Club has not made much of an effort to provide secondary market investors a useful tool to browse notes; a bad sign in my opinion.  Remember, I am approaching this from the point of view that Lending Club is more concerned about the primary market than the secondary and therefore the tools, information, support and returns for buying notes will be fewer, less and lower than what is available for originating.  I want to be proven otherwise, but right out of the gates I have concerns:

1.  Poor documentation

If you spend any measurable amount of time on Lending Club’s note trading site you will notice that there is a considerable lack of comprehensive documentation.  For example, I have tried to calculate the ‘Yield to Maturity’ column from the respective notes with no success.  I have seen other discussions on the net attempting the same with no luck.  This is such an important number for investors that I cannot accept a black box calculation and it bothers me that they have not/will not disclose the math behind that number, which leads to my next concern.

2.  Poor Customer Support

I have sent an email to Lending Club’s support asking them to explain how they arrive at the ‘Yield to Maturity’ for each note and to provide the formula that they use.  That was several days ago and I have heard nothing back.

3.  Inadequate Tools to Purchase Notes

This is where I have seen the most complaints around the net about Lending Club’s note browsing capabilities.  After spending  some time myslelf trying to browse notes I have the same complaints.  Here are some obvious problems:

a)  Inability to Browse Notes without visiting multiple pages

There are a total of FOUR different pages one must visit to view all of the relevant information on a note.

1.  Browse Notes page – first page you access

2.  Loan Performance page – provides information about loan’s hisotry including payments

3.  Loan Summary page – provides information about the loan, borrower and explanation for the loan

4.  Loan Prospectus page – provides information about the relevant prospectus filed with the SEC

Here is the problem, you have all of these pages to visit with no ability to get back to where you started, thus by the time you finish researching the loan you have to browse back to the ‘Browse Notes’ page, run your filter criteria to narrow the 29,000+ loans down and then manually look for the note you where researching.

b)  No ‘shopping cart’ type of functionality

This is truly the most inconvenient and frustrating.  There is no way to browse thousands of notes while individually flagging, marking or saving notes for further review.  There really is no excuse for this, horrendous design flaw.

c)  No search or advanced filtering functionality

If you know a specific note that you want to review or purchase you can forget about saving time to jump directly to it.  You will have to use the existing and inadequate sorting functionality to find that note.  Filtering capabilities do not exist.

Beer Goggles Included

Again, I am being the skeptic here but is Lending Club promoting the secondary market with little regard for its performance independent of the primary market?  I cannot find any data that shows how investors are doing outside of the primary market? Why not show returns for each seperately?   These are two different markets and each has their own risk profiles.

The secondary market is more important to primary investors than it is to those that want to buy and sell notes on the secondary market.  The secondary market is how primary investors get liquidity, so I am willing to argue that the secondary market is designed for and tailored to attrack originating investors.

If that is the case then where does that leave the folks that cannot originate loans but can purchase on the secondary market?  Are we getting scraps?  What is Lending Club doing to protect secondary market participants from purchasing notes that could be bad investments like ones with a ‘Yield to Maturity’ of -269.54% (yes, that is a real example) or an asking price that is 278.95% above PAR value (same real example)? Why does Lending Club not institute controls on what is an acceptable asking price and Yield to Maturity?

I know some may argue that free markets work best when left alone but I don’t beleive that folks should be left to their own devices when information is indefensibly scarce and difficult, if not impossible, to obtain.

Posted in Finance, P2P Lending | 1 Comment

Democracy and Its Discontents

Posted on May 18, 2012 by Jose L. Velez

David Brooks of the New York Times just wrote an interesting piece about the political problems facing the United States and the European Union.  He writes that both the U.S. and the European Union are facing a situation where two political constituencies, whom have historically been, when unrestrained, diametrically opposed to one another, have retreated to their extremes with no appreciation for their own weaknesses.  The problems are very real as are the concerns each side maintains with utmost passion.  I find what Mr. Brooks says compelling, relevant and in much need for inclusion in the political conversations going on today.

Democracy is a fragile thing and one that requires an understanding of it biggest weakness – its constituents.  How do you govern a large and disparate group of people, provide for each of their needs, give them the freedom to express their views while also protecting them from discrimination or persecution for their beliefs by others, and so much more by simultaneously representing all and excluding none?  How do you get a consensus to govern such a group while ensuring that decisions are made with prudence and consideration for all without operating as a mob?

Mitch Daniels has recently written a book, Keeping the Republic, that I recommend to anyone interested in what I would consider a thoughtful discourse in what ails American politics.  He touches on the issue of democracy and how it can undo itself.  He quotes Rosseau as saying that, “In the strict sense of the term, a true democracy never existed, and never will exist.  It is against natural order that a great number should govern and that the few should be governed.”  Democracy is more than simply allowing the majority to impose their will; it is both a process and a state of being.  There is a fine line between democracy and mob rule.

Democracy absolutely cannot function without a modicum of respect for those it means to govern as well as an unabashed and resolute commitment to temperance; because the existence of these instills confidence and legitimacy among the public while a lack thereof can be a dangerous place for both elected officials and their constituency.  Political turmoil, economic malaise and violence are staples of public sentiment towards governance they view as illegitimate or unresponsive to their needs.  Elected officials of recent generations have begun to discard moderation and long term views for the whims of their constituency as Mr. Brooks describes as a “mind-set of marketing executives”.

It would behoove these officials to recalibrate their aim on who the real enemy is – themselves.  The business of governing is not one of zero sum but of diplomacy.  To acknowledge the opposing side’s concerns and to work in earnest towards a solution that agrees to all; because a short-lived gain that is destined to be recalled serves no one and in fact only cements a public discontent for democracy and its legitimacy over the long run.

Posted in Democracy, Politics, Society | Leave a comment

The slowdown in China and what it could mean for Brazil.

Posted on May 6, 2012 by Jose L. Velez

The May/June issue of Foreign Affairs has an insightful analysis about the slowdown in China and what it could mean for Brazil’s economy.

As most are aware, China has built an export oriented machine over the last decade that has overtaken Japan and become only second to the U.S. as one of the largest economies in the world. China has seen compounded yearly GDP growth in excess of 7% since 1999. During that time as China flooded world markets with inexpensive products ranging from textiles to electronics it has had to satisfy a voracious appetite for raw resources. Correspondingly, commodity prices have been on a tear and markets with an abundance of those raw resources has benefited. Brazil is one the countries that has benefited from China’s demand for raw resources.

Brazil’s former president, Luiz Inácio Lula da Silva, who was recently succeeded by his Chief of Staff, Dilma Rousseff, has been largely attributed with helping Brazil become one the the largest economies in the world and bringing millions of Brazilians out of poverty and into the middle class. During his tenure Lula’s administration focused heavily on social programs like the Bolsa Familia, which provided conditional direct cash transfers to the poor in exchange for activities that included keeping kids in school and vaccinated. It is estimated that poverty in Brazil fell 27% during Lula’s first term. In 2008 Brazil became a net creditor for the first time in it’s history after relying on foreign loans for decades. Exports were a significant contributor to this and with China, as well as most of the global economy, experiencing a slowdown Brazil’s economy may experience mounting headwinds.

It will be worthwhile keeping an eye on Brazil’s exports.  I’ll try to get data on Brazil’s exports for the last ten years to provide some charts.

Stay tuned…

Posted in BRICS, Business, Economics, Globalization | Leave a comment

Lone Star State is a Pretty Good Place to Live & Work

Posted on September 9, 2009 by Jose L. Velez

Forbes reports that Texas has three of the best cities to work in the nation.  Dallas, Houston and Austin are among the top cities to earn a living while also keeping living costs down.   Being a native Texan for many years it has never been lost on me how inexpensive Dallas is compared to cities like Seattle, New York and L.A.  The cost of living in those cites has been a game changer for me at least twice during my career. 

There are some interesting things to think about and perspectives to ponder.

  • If I were a policymaker in a competing state I would probably want to take a close look at my home state and how it compares to to Texas.  I would be interested in finding ways to attract more employers and job hunters.

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  • Which came first? The chicken or the egg?  Did these employers setup shop here because of a good stock of skilled talent or whas the initial move a cost-benefit one where taxes and state provided incentives were offered?

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  • Forbes did not publish (or at least I did not see it) their data tables but I would be interested to see how each city in their list ranked in terms of transportation options.
Posted in Daily News, Economics, Human Resources, Labor, Real Estate, Society | Tagged , , , | Leave a comment

Offshore Tax Havens: A Good Time to Reconsider

Posted on August 31, 2009 by Jose L. Velez

The Times reports today that France has obtained a list of 3,000 account holders at Swiss banks.  This is only days after France and Switzerland reached an agreement to exchange information on French citizens who hold Swiss bank accounts. 

Just last week the U.S. Department of Justice and the I.R.S reached a deal with Switzerland to get the names of 4,450 U.S. account holders who may be suspect of hiding income and assets from Uncle Sam.

And the week before that Britain and Liechtenstein inked a new tax cooperation agreement to allow British account holders the opportunity to disclose their hidden accounts.  British citizens must disclose their accounts to get some leniency for tax evasion and those who do not will be forced to move their money out of Liechtenstein and face the full consequences – back taxes, penalties and possible legal action.

These three events are not coincidental and clearly indicate a growing trend among nations to shore up badly needed tax revenues.  The question is what will happen when the global economy picks up again.  There are hundreds of millions, if not billions, of dollars at stake for countries like the United States, Britain, France, Germany and Italy.

Once the tax coffers begin to rely on an increased taxpayer participation rate it would be hard to notice any dramatic reduction.  But that is where I think we could see an eventual pullback to the traditional tax evasion scheme.  It is always that slow and gradual change that proves to be the hardest to see.  A slow but sustained effort to chip away at these new rules and agreements could be just what the banks ordered.

The motivations behind hiding assets from tax authorities can vary from the outright criminal to well justified.  For those parties that use offshore havens to sustain their criminal activities I share no sentiment with you.  Those activities include money laundering, tax evasion and fraud.

In the case of tax evasion I take additional exception, as I liken it to you living under my roof and refusing to help pay the rent.    Regardless of the extent to which one may agree or disagree with the tax code, the fact should not be lost that citizenship has its privileges AND responsibilities.  One of those responsibilities being that of helping to pay for the government that protects you, defends your way of life and makes it possible for you to create any wealth in the first place.  Grievances with tax rules should be funneled through the appropriate channels – call your senator not your offshore banker. 

If you are one of those 4,450 lucky winners on that UBS list then you might want to call your local I.R.S agent too, as the Sep. 23 deadline for disclosing those secret accounts is getting close.

Posted in Business, Daily News, Diplomacy, Economics, Globalization, Law, Politics, Taxes | Tagged , , , , , , , , , | Leave a comment

Can you do better than Bernanke & Co.?

Posted on August 28, 2009 by Jose L. Velez

The Federal Reserve Bank of San Francisco has posted a “Fed Chairman Game” on their website.  It lets you set monetary policy for 16 quarters.

The game starts you off with the fed funds rate set at 4.50%, unemployment at 4.75% and inflation at 2.14%.  I played a few times and got hit with events like energy price spikes and stimulus programs.  I lost the first two tries but on the third go-round I decided to keep the fed funds rate around 3% ahead of inflation while also keeping an eye on th unemployment rate.  I am happy to say that I got to keep my job at the end of the game.

Give it a go and see how you do.  Click here to access the game.

Fed Chairmain Game

Fed Chairmain Game

Posted in Business, Daily News, Economics | Tagged , , , , , | Leave a comment

Energy Aware Internet Routing

Posted on August 17, 2009 by Jose L. Velez

Technology Review reports today about a new energy aware internet routing process.  Some folks at MIT, Carnegie Mellon and Akamai looked into energy price fluctuations and data center loads across the country to see if there could be any cost savings to rerouting data from high cost data centers to lower cost ones.  Their results have shown that large Internet companies like Google, Microsoft and Amazon could save up to 40% on their electricity bills – millions of dollars in savings.

They don’t mention any details as to how the ‘smart routing algorithim’ works but my guess is that they are using decision tree learning with a heuristic algorithm like ID3 or C4.5.  Their model would probably need some way to factor in arbitrage opportunities within the electricity markets on a real time basis while simultaneously tracking data-center loads.  One of the problems they mention that holds this technology back is that most data-centers today lack the ability to throttle power usage with loads – in other words, the servers need to be able to consume a fraction of their full load power when idle.

What are some potential implications for the future?

New market opportunities for those firms that can offer the hardware solutions to make servers ‘energy elastic’.

This could be a boon for the software cloud, as network computing could take advantage of these routing systems to find the least costly resource.  Remember back in college when you had to use one of the computer labs?  It was basically a room full of computer stations made available for everything from creating presentations to developing software applications.  Now imagine if each of the computers in that room costs a different amount to use.  The ideal thing to do would be to walk around the room to find the cheapest one – of course making sure that it has the needed capabilities.  I can imagine a situation where cloud software would locate the least costly computing resource for a given task anywhere around the country or world just as I would walk around that computer lab searching for the cheapest available station.

I’m speculating here but could this lead to a normalization of electricity prices across the country as data centers compete for locating and using lower cost centers?  I was only able to find one 2005 article mentioning that data centers consumer about 1.5% of all U.S. electricity.  I think it would be a fair guess that today’s number might be closer to 2% or higher.  If so then how would that impact states that currently have lower electricity rates?  Lots of potential externalities here to contemplate.

The article also mentions that energy companies could negotiate with large internet firms in advance of expected peak loads to mitigate potential outages or problems.  Energy companies could essentially ‘shape’ their loads to prevent failures or outages.

A problem I see with this technology is that if it is used extensively in a decentralized manner then most of the cost savings could evaporate quickly.  I know what you are thinking here, “but that is to be expected.  Its simple supply and demand here – increase the use of product x over product y until the marginal cost reaches marginal benefit”. 

Here is my problem:
If every party acted independently and outside of a central market or clearinghouse then the anticipated savings would be lost to transactions costs.  These transactions costs being those associated with moving data from one place to another and doing so with incomplete information. Take for example if an underutilized data center pops up on the radar of ten or so Internet companies.  They each, independently and unbeknownst to the others, make the move to the new data center.  This surge in load may lead to an increase in costs and therefore mute any cost savings.  There could even be a potential for some Internet companies to have to move yet again - further increasing the cost of the move.

I think that a centralized market or clearinghouse for this type of transaction would facilitate this form of intelligent routing.  Of course, I am no expert in data center economics or how or if some of these problems or opportunities are realistic.  But with my limited knowledge they would be questions I would ask.

Posted in Arbitrage, Business, Economics, Energy, Real Estate, Statistics | Tagged , , , , , , | Leave a comment

Using Credit Checks for Employee Screening – Slippery Slope

Posted on August 12, 2009 by Jose L. Velez

The Times and NPR have written recently about employers using credit checks as an additional means to screen potential new hires.  I’ve heard about these on rare occasion but it seems that a trend may be developing whereby one’s personal financial situation becomes a hiring tool.  This is an interesting issue that poses some important questions:

  • Should potential employers have access to your financial history?
  • What relevance does one’s credit score have on employment candidacy?
  • What protections have been put in place to prevent abuse?
  • Who (what federal agency) is representing the interests of the candidate?
  • Are employers opening themselves up to potential legal problems by making hiring decisions based on personal and confidential financial information?
  • What kinds of externalities can we expect from this activity?

Lets start with the most basic question – why should potential employers have access to this information?  The most compelling argument I have seen is that potential employers can use a credit report to gauge a candidate’s decision-making abilities.  It goes like so: the likelihood that a candidate who has a history of delinquencies, collections, foreclosure or perhaps a bankruptcy will make similarly poor decisions in their professional life is higher than a candidate with a clean credit history with few or no blips. In other words, the argument says, “hey, this person has taken good care of his/her financial reputation and demonstrated responsibility over the long term”.

While I may appreciate and even agree with that claim, I cannot reconcile that argument against a more important claim – that personal financial and medical information is too sensitive to be used for anything other than what they were originally intended for – doctors need your medical record to provide health care and banks need it to decide whether they should lend you money for that car or business idea. Why did I throw in medical information? Because I consider both to be the last bastions of personal privacy afforded us by the government from prying employers, insurance companies, marketing agencies and the like.  Although HIPAA has made progress with Protected Health Information it seems that our credit history is slowly becoming a one-stop shop for anyone willing to write Experian, TransUnion or Equifax a check.

Another area of concern is what happens to this information once it is obtained by potential employers?  Who in the organization has access to this information?  In today’s world of Twitter and Facebook how long will it be before we hear about someone tweeting about a candidate’s bankruptcy?  What happens after a candidate has been hired?  Will the employer have an obligation (read unintended consequence) to disclose any of this information to other parties?

Perhaps my strongest concern for using credit reports as a way to screen job candidates is the long-term and compounding (yet to be determined) socioeconomic effect.  Hans Rossling’s enlightening presentation at the 2006 TED Conference comes to mind.  Watch it below.

What we should be cognizant of is that this is a slippery slope we have started.  I know that my car insurance provider accesses and (whether they acknowledge it or not) utilizes my credit score to determine my premiums.  Although I have yet to be asked by a potential employer for my credit report it may only be a matter of time.  What will be next?  Will credit scores be required for admission to colleges and universities? Hey, the admissions departments could argue that it would help them keep their graduation rates high.

I can imagine a situation where pervasive use of credit reports for employee screening could perpetuate a gradual segregation of those who have had the success or luck in maintaining their credit in good standing from those who have not.  I can imagine watching Hans Rossling’s presentation 10 years from now as he shows the ‘completely new world’ we live in, where those with good credit have access to every definition of economic opportunity one could conceive while those with poor credit are left to struggle for whatever remains as they descend into a self reinforcing spiral.

Posted in Business, Daily News, Human Resources, Labor, Law, Politics, Society, Sociology | Leave a comment

Economies of Geography???

Posted on December 22, 2008 by Jose L. Velez

I’ve been tossing a notion around for some time now and it is something that comes up in the public discussion every now and then.  Up until this point I had really limited it to the food industry but after reading an article about small local banks experiencing very healthy increases in deposit customers I realized that there must be something more profound going on.

Big business, big risks
For decades we have talked about the impact globalization has had on society, political affairs and economics around the globe.  The range of opinions about this phenomenon are as varied and numbered as the impacts.  Often Globalization gets tied to outsourcing and, depending on whether you are a savvy business person or an ambitious politician, it signifies the creation of competitive advantage or the loss of many jobs.

It has also found itself as the centerpiece of a merger or acquisition strategy for a large business that needs to ‘compete on a global scale’.  Globalization also receives credit, rightfully so, for the creation of a new more advanced global economy where integration and a shared sense of fate are its underpinning.  But there is something else that Globalization has done which may bring with it a new set of risks.

Only as strong as the weakest link
Globalization has, at least in the public discussion, subordinated the importance of the local economy and small business to macroeconomic initiatives and large enterprises.  I have no intention of meaning this as a blanket statement but only to describe the extent to which we have operationalized globalization into our social, political and economic models.  The risk of glazing over the details and focusing on the forest is that we are unable to see if the trees are rotting from within.

Take our current situation, where one large institution after another has failed, gone under or is in the process of going under.  We can also ponder over the real estate crisis and whether California, Florida and Nevada where signs of a distressed forest.  The inherent risk of this flawed perspective is that risk itself is magnified.  Whereas mergers and consolidations were viewed as positives for the customer and business the unintended consequence and therefore risk to society was that a failure would sting that much more.

All economics is local
I think ‘Tip’ O’Neill was onto something when he said that “all politics is local”.  That statement could easily be tweaked to say the same for economics and evolution – I will get back to the evolution part later.  There are some products and services that just have no business being brought in from anywhere other than the local community.

Take for example food from the grocery store.  With the exception of those foods that require specific geographic characteristics most fresh foods could be produced within close proximity to its customer base.  There are several advantages to the customer, business and economy from maintaining a close relationship between the food we eat and our community.  This form of food patriotism is among other ways to achieve better sustainability.

Another trend that is becoming prevalent in today’s economic climate and ties back to the local economy is community banking.  Local banks are benefiting directly from the lack of confidence in large banking institutions.  In fact many are seeing double digit increases in new deposit accounts as a result.  Local banks, which tend to have more established and personal relationships with their customers, have the advantage of knowing their customer and what their needs are.  The risk of lending can be further reduced because the banker has a more intimate knowledge of the business, its risks and, most importantly, the principal asking for the money.

Survival of the fittest
This is an aside but I mentioned evolution earlier and wanted to take this opportunity to throw organized labor under the bus.  The fundamental idea behind organized labor has always irked me, as it seems to fly in the face of evolution.  There are some things in life that we simply cannot control and must either adapt to or die from it.  Organized labor, for the most part, has fought progress only to stave off the inevitable.  Not only does this intransigence make it difficult for a business to operate competitively but it poses a significant risk to a community when this mentality pervades its labor force.

Some communities in Michigan are looking how to offset the effect of job lossess as a result of failing auto companies.  In deed some of these small cities face serious problems as their largest employer is on the brink of failure.  Their precarious situation presents an opportunity for adaptation to the reality of the marketplace for labor.  While some communities are working to bring other major employers to the area they will face a major obstacle.  Until the business community sees a fundamental capitulation in the trend for labor to organize these communities will face an uphill battle – let me rephrase that, they will have to scale a near vertical mountain on a rainy day with only a tattered old 1/4 inch nylon rope.  Good luck, I am sure that you all can organize into a tall human chain with the prospect of getting at least one of you to the top, but then you will spend an eternity arguing why YOU should not be the one on the bottom.

Posted in Business, Economics, Globalization, Society | 1 Comment