COMMENTARY: Try to Eschew Investment Without Profits

COMMENTARY: Try to Eschew Investment Without Profits Michael Hart Editor On the front page this week, we have a story explaining that business is so good at Countrywide Credit Industries in Calabasas that they can’t hire people quick enough to process all the loan applications they’re getting. They’ve taken over the buildings that once housed Bugle Boy in Simi Valley and now are using more than 1 million square feet of office space in that city. It’s the kind of story that’s liable to be comforting, perhaps encouraging: If somebody somewhere is making money, you might think, maybe I’m next. Maybe you are, but the reason the Countrywide staffing “challenge” is news is because it’s so unusual. Elsewhere in this issue you’ll read about situations that are not so encouraging: -Vacancy rates in the once-robust Burbank office market were 2.7 percent a year ago. Today, by some estimates, it’s nearly 25 percent and development projects in the works have come to a halt. -An uncomfortable number of technology companies in the 101 Corridor have stock prices in the 5- and 10-cent range and officials spend as much time worrying about how to avoid delisting as they do making money. -The Burbank Airport Authority decides to raise the fees it charges airport shuttles and off-site parking facilities, hoping to nickel-and-dime its way into balancing books thrown out of whack since Sept. 11. Sure, elsewhere we read that the DJI broke the fabled 10,000 mark last week and that Cisco has hopes for increased earnings this quarter. But we also read almost on a daily basis reports of holiday retail spending, looking for some reason to believe that all but the Costcos and Wal-Marts of the world will not be seeking bankruptcy protection in the first week of January. And regardless of whether the recession officially started in March or on Sept. 11 or whenever, in years to come our most poignant memory of this economic slowdown likely will be the grinch-like way we trolled through this holiday season. How many invitations have you gotten to parties given by suppliers or business associates? What are you spending on gifts to clients this year? And perhaps most painfully, what did you tell your employees about the scaled-back Christmas party they’re getting? The quarterly UCLA Anderson Business Forecast was released last week. The writers of the UCLA report like to brag that they are more often right earlier with these forecasts than others, so disbelieve at your own peril when they say good times will return shortly. Of more interest to me in the report than predictions for the future were their reasons why the causes of this recession were so different from those in the past. Number one on their list of factors was something they call corporate imbalance: “Investment without profits was the first imbalance of the Internet Rush to experience correction,” the Anderson report states. The correction of this “investment without profits” phenomenon we are now experiencing sounds an awful lot like simply the application of common sense. Why, we continue to ask, did otherwise smart-seeming people invest hundreds of millions in enterprises that now seem like obvious losers? Why did otherwise cautious investors move their money into stocks that now appear to have had little going for them but the smooth talk of guys in khakis and polo shirts? Why did everybody from venture capitalists to those trying to get a little traction from their 401(k)s invest without profits? Never mind Lent, never mind Yom Kippur. Now as we spend our afternoons at the office instead of plowing through a series of parties at other people’s offices, and enjoy our smaller, more “meaningful and personal” holiday celebrations would be a good time for some reflection on how we might exercise a little more common sense in 2002 and avoid much more “investment without profits.” Michael Hart is editor of the San Fernando Valley Business Journal. He can be reached at [email protected].