Certainty

Discussion in 'Politics, Religion, Social Issues' started by citizenzen, Dec 15, 2010.

  1. citizenzen macrumors 65816

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    #1
    I was watching the McNeil Lehrer News Hour on PBS where Gwen Eiffel was interviewing two CEOs regarding their meeting with Barack Obama.

    One CEO in particular emphasized over and over again how important "certainty" is to the business world and without "certainty" they could not hire more workers and drive down the numbers of unemployed.

    I was struck by that word... certainty.

    Since nothing is certain in this world, how can anybody, let alone any business expect it? It would seem to me that in a free market nothing is certain, yet here are to major CEOs meeting with the president and making that a central part of their discussion.

    That smells funny to me.

    I wonder if it smells funny to you too.
     
  2. obeygiant macrumors 68040

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    #2
    Well these CEOs are what you would call "rich". And since we all know that the GOP and conservative candidates support tax breaks for the rich, why would they give a liberal the pleasure or the credit when they hire a new workforce. Why not just sit on your pile of money and wait for a president that gives you tax breaks to hire and reflect positively on that behavior. So vote conservative to lower the unemployment and join the good-ol-boy club.

    citizenzen, I'm impressed with your astute observation on an otherwise hidden situation.
     
  3. citizenzen thread starter macrumors 65816

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    #3
    Because the really innovative and daring take the risks to bring their products to the marketplace despite the fact that certainty doesn't exist.

    It's only when you get that a of money that you expect politicians (and pay them handsomely) to ensure your ability to maintain it.

    The CEOs liked to call it an issue of "certainty".

    I have trouble distinguishing it from "blackmail".

    You give us want we want... or else...
     
  4. OutThere macrumors 603

    OutThere

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    #4
    Yes, the CEOs must be certain they will be able to afford a second Bentley next year before they consider hiring another pawn with an advanced degree and years of experience in a sh***y 1099 contract position.
     
  5. citizenzen, Dec 15, 2010
    Last edited: Dec 15, 2010

    citizenzen thread starter macrumors 65816

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    #5
    video (16:15)

    Plus they made a point to go after "entitlements" (19:45).

    Heaven forbid you have anything to retire on.

    I'd like to tar and feather the lot of them.
     
  6. Gelfin macrumors 68020

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    #6
    It doesn't smell funny to me, but I also recognize that "certainty" in this context doesn't mean anything like a logical, philosophical definition of certainty. When they say the business world responds to "certainty" that is no different from relationship experts saying women respond to "confidence."

    The human animal responds positively to bullcrap delivered with believable charisma and authority. That is all there is to that statement.
     
  7. itcheroni, Dec 15, 2010
    Last edited: Dec 15, 2010

    itcheroni macrumors 6502a

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    #7
    I'm confused by the logic that, if a company shows a certain amount of profit, they must therefore hire people. If you ran a company, wouldn't you hire someone if you needed more help? What does profit have to do with it?

    If a CEO decided to hire people for no other reason than to spend profits, I wonder how long that company would last. These large financial entities don't need more people to push paper around, especially since their "profits" are a fraud. I suspect we will soon discover that, besides proprietary trading, these companies haven't really been making as much as they say. Most of their profits have come from a temporary change in accounting rules.

    I find it funny that as much as people say they hate these corporations, they unquestionably accept the fact that they "needed" to be bailed out or else the world would have come to an end. I guess it's better to have a sovereign debt crisis. These companies have created more derivatives than any country, including ours, can handle. It wasn't the smartest thing to transfer them onto our country's balance sheet.

    http://www.washingtonsblog.com/2008/12/central-banks-central-bank-says.html

    Yes, this article is 2 years old. Think about what has happened since.
     
  8. blackfox macrumors 65816

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    #8
    I would imagine that it's a reference to company growth, more than profit - which often go hand-in-hand....
     
  9. itcheroni macrumors 6502a

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    #9
    These companies are growing? In what aspect (besides taking government handouts and passing them on as bonuses)?
     
  10. Liquorpuki macrumors 68020

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    #10
    In this situation, their definition of certainty means forecasting that the economy won't take another dump. They're basically addressing the dichotomy between the # of jobs the stimulus package was supposed to create and smaller # of jobs that were actually created.

    If in spite of current growth, the economy might take another dump in 6 months, it would not be a sound business decision to hire workers that will drain existing capital and might end up getting laid off anyway. Instead it would be better in the long term to run lean. This is what a lot of companies have been doing - they just don't trust that things are actually gonna get better. So they don't hire.

    If you owned a bakery and could only bake 100 pies a day, but you had demand for 200 pies, you'd need to hire someone to help you bake the other 100 so you could maximize your profit. So like the other guy said, growth and profit go hand in hand.
     
  11. itcheroni, Dec 16, 2010
    Last edited: Dec 16, 2010

    itcheroni macrumors 6502a

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    #11
    Let me try and make my own analogy. A company sees pies are selling well, so it spends most of its money on pies to sell for more money later. Suddenly, the demand for pies drop. The company is going to go bankrupt, but the company has a lobbyist.

    He tells the government, Hey, help us!

    The government says, Sure, you donated a lot to my campaign, so I'll use tax dollars to pay 100% of what you thought the pies were worth. Whatever we don't buy, you can value it at 100% too.

    The company says, Thanks, now I have all this money for bonuses.

    All is well until the public gets angry over not having jobs while the company gives out fat bonuses. Then the government responds by saying, Hey, you guys have all this profit, you need to hire people.

    The company stalls this absurd request by saying, The economy is too uncertain at this time.
    --------
    It is all a show for the public. If the economy were really improving, company executives would be buying their own stock. Instead, the selling to buying ratio for company executives is telling: http://www.zerohedge.com/article/insider-selling-buying-2341-1

    http://www.thestreet.com/story/10934274/20-stocks-with-huge-insider-selling.html

    It sounds like they are more certain than they claim. They just don't want us to know what they're certain about.
     
  12. citizenzen thread starter macrumors 65816

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    #12
    Then the CEOs need to take a lesson in spinning their message. It would have been a whole different thing to hear them talk about this if they had used the term "confidence" instead of "certainty".

    Here's how I think it went down at that meeting with Obama...

    I think their need for certainty meant pressuring Obama to at least extend the Bush Tax Cuts for the top 2% if not promise more incentives for corporations and the CEOs personal bank accounts. I think they asked for these incentives while pushing the agenda that the government needs to increase taxes on the poor, cut entitlements and reduce government services. And I'll bet Obama was all too happy to cave in to their demands.

    American government is increasingly becoming a tool for corporate growth and not for the people. That is a certainty.
     
  13. Tomorrow macrumors 604

    Tomorrow

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    #13
    Bad choice of word, IMO. Read on.

    It's expensive to lay off workers, and it's expensive to hire and train new ones after you begin re-hiring. They want to minimize the number of cycles of that.

    Again, I still think "confidence" would be a more appropriate choice of word than "certainty."

    And on that point, we agree. :cool:
     
  14. mcrain macrumors 68000

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    #14
    I think one thing that was missing from the article and this discussion is that there are a lot of companies that have not hired, but rather, have increased the work load of the workers they currently have.

    I know it's not identical because of union and legislative protection, but government workers are being asked to do more and more with fewer people. The situation is much worse in jobs where employees are fungible.

    If a companies are sitting on over 2 trillion in profits, while at the same time cutting benefits and requiring workers to work more and more and more, something is wrong. I think that might be the point, but this isn't a field I'm all that well versed in.
     
  15. iJohnHenry macrumors P6

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    #15
    Good for you.

    The field of greed is full of thorns.

    You have to have the inclination for it.
     
  16. fivepoint macrumors 65816

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    #16
    Here's how I see 'certainty' being incredibly important to the tax debate. I will use as many simple, non accounting/economic terms as possible...

    • Imagine if you're a small company and your annual revenues are 200,000.
    • Your Expenses (minus labor) are 100,000 (or about 50% of revenue for simplicity).
    • You currently have about 90,000 in labor (including taxes, etc.) between three people, and you're considering adding a fourth. The fourth person will cost you 30,000 in labor (including taxes, etc.)
    • Consequently, if nothing changes, you're looking at a net income (profit) for the company of about 10,000.
    • The reason you're considering the fourth, is that according to your calculations you think spending that 30,000 will result in 40,000 in additional revenue, minus the 30,000 and additional expenses which after all other taxes, etc. would result in additional $2,000 in actual net income (profit).

    The point being... they're often working under tight financial situations where one decision can mean the difference in profit, and bankruptcy, or bonuses - no bonuses, or growth - no-growth, etc.

    Now... under the current tax rate this option makes sense to the small business. Even though the addition of the employee is only adding about 2,000 to their bottom line. It's not very much, and even the slightest change in taxation (or other policy change) could change that positive 2,000 to a negative 2,000 very easily.

    So, when the business sits down to make the final decision on whether to hire or not, much of it comes down to certainty. How certain are they that tax rates will remain the same? It they are raised, will the new employee actually cost them money? How certain are they that other additional regulations or expenses won't come their way from the federal government? If they do come, will the new employee actually cost them money?

    Companies make decisions every day based on certainty (more often referred to as RISK in the business world). Every new product created, every new employee hired must consider risk at some level. This is why businesses traditionally get nervous with major governmental change. Whether it's a huge new bill or a huge change in the party in charge, change is generally bad because it adds additional risk to every decision they make. The result is them being forced to be more conservative with their decisions and to take less risk willingly.
     
  17. Sydde macrumors 68020

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    #17
    Interesting how the points made in posts #16 and#7 so clearly and unambiguously illustrate the lack of correlation between hiring (and by extension, the economy as a whole) on the top-bracket tax rate.
     
  18. Lord Blackadder macrumors G5

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    #18
    Certainty may be an important aspect of business decisions, but the real trick to business is successfully dealing with uncertainty. At any rate, you can't oppose a change to something simply on the basis of it introducing uncertainy, otherwise there would be no changing of anything at all. Any change results in some level of uncertainty.

    Businessmen will always complain about anything that might impact their bottom line. It is for politicians to look past the narrow interests of the various different groups of businessmen and try to enact policies that best answer everyone's needs and avoid shafting certain groups in favor of others.

    Good businesses are skilled at gauging risk, but the United States government should not operate like a business, because it is not a business. Making a profit is not something that the US government should be worrying about (which isn't to say we shouldn't be fiscally responsible). We can't give the stock market too much power in controlling legislation. If we avoid passing bills that might cause a drop in stocks, Wall Street assumes an overmighty role in government.

    Nobody passes laws solely designed to inhibit business. Legislators that enact laws that add uncertainty to the business world do so with the intent that the bill provides some sort of benefit to society that outweighs the additional (and likely temporary) risk that businesses might have to take on.

    When the government started mandating new environmental and safety standards in automobiles, automakers threw a fit and lobbied against it. Because it reduced certainty.
     
  19. Eraserhead macrumors G4

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    #19
    I thought businesses paid taxes on their profits...
     
  20. fivepoint macrumors 65816

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    #20
    I'm simply attempting to answer why companies are inherently concerned with 'certainty' (ie. risk).
     
  21. skunk macrumors G4

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    #21
    There are employment costs, too, which can negate profit.
     
  22. Lord Blackadder macrumors G5

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    Fair enough.

    I was trying explain why businesses' concern with certainty should not result in an equal concern in Congress or the White House.
     
  23. Liquorpuki macrumors 68020

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    #23
    That's a platitude if ever I saw one
     
  24. mcrain macrumors 68000

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    #25
    But that doesn't answer the question about why companies that are clearly making lots and lots of money, and who anecdotely need more employees, aren't hiring.
     

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