Sunday, April 1, 2012

Miscellaneous Musings - On Austerity, Budget Cuts, and The Secret of My Success

April 1, 2012

On Austerity, Budget Cuts, and The Secret of My Success

In 1987, Michael J. Fox was a rising star. Family Ties was in its sixth season, and Fox had already found success in two blockbusters, Back to the Future and Teen Wolf, both from 1985. 1987 was also the year in which U2 released its highly successful Joshua Tree album and Michael Jackson’s follow-up to Thriller, Bad, landed in music stores. It would eventually sell over twenty-five million copies. In the early part of 1987, the Iran-Contra Affair dominated the news, temporarily making household names of Oliver North and his secretary Fawn Hall. In June, Ronald Reagan implored Mikhail Gorbachev to tear down the Berlin Wall, and war raged between Iran and Iraq. The end of the year would see the declaration of the First Intifada in the West Bank and Gaza Strip and coups in both Fiji and Burundi. In July, the Dow Jones Industrial Average reached a milestone, closing above 2,500 for the first time ever. In October, it fell 508 points on what came to be called Black Monday. In other words, it was a rather eventful year.

On April 10, 1987, Michael J. Fox’s latest film The Secret of My Success hit theatres. After failing to find an audience for Light of Day, his rock and roll drama with Joan Jett, Fox needed a hit. He got it with The Secret of My Success, which went on to make just under $67,000,000 in theatres. This is not a lot by today’s standards, but 1987 was a different time. The standard for a blockbuster at that time was the $100 million mark.

The Secret of My Success follows Brantley Foster, fresh out of business school, as he tries to make it big in New York. After being fired from his first job – on his first day, no less – he eventually finds employment in the mail room of a big firm through a very distant relative, Howard Prescott, who takes a liking to Brantley after hearing one of those inspirational movie speeches about first chances and desire. The film then follows Foster as he finds love, assumes a fake identity in an effort to change the fate of the company, and accidentally gets involved with his uncle’s wife. The film makes the unfortunate decision to devote too much of its screen time to the least interesting of these elements. So instead of being a film about corporate culture, greed, and business survival, it is a film in which its most pivotal scene involves its four main characters attempting to sneak into each other’s rooms. This of course leads to all four of them being in the same room at the same time and to all of their secrets being revealed. It is a scene that you can see coming a mile away.

What is relevant about the film today is what it says about a company’s survival. In the film, Prescott’s company has hit hard times, partly due to his own mismanagement and no doubt partly due to the changing economic climate that was going on in the country at the time. Prescott’s solution to the company’s woes is to make painful cuts until the company reaches a more sustainable level. The approach leaves his company vulnerable to a corporate takeover, which may be what Prescott has in mind all along. Foster, in the guise of Carlton Whitfield, argues that the company should be expanding instead. He seems to be arguing that a company should be building itself out of debt, creating opportunities for profit instead of limiting itself. It is the kind of approach that Thomas Friedman would likely be proud of.

This film came to mind as I was reading about the present state of Greece, where painful austerity measures are being undertaken, and Best Buy’s decision to close a number of its larger stores. What I find discomforting about Greece’s plight is the lack of hope it inspires in both its population and its businesses. The rates of despair, drug use, and suicide are all said to have risen in Greece, as more and more Greeks finds themselves unemployed without much in the way of job prospects. The problem seems to be that its austerity measures do nothing to encourage or promote job growth. Instead, Greece has seen an exodus of capital and a large brain drain, as both personal wealth and the best and brightest Greeks leave for greener pastures, some unlikely ever to return. In essence, Greece is adopting Prescott’s approach, and that approach would have led to massive layoffs and higher prices for consumers. Other countries such as the United States have enacted stimulus measures, which are more in line with Foster’s recommendations, and recent economic data has caused some economists to be cautiously optimist about the future. In fact, the most common complaint about the austerity measures that the United States adopted is that they were too small, not that they should not have been enacted at all.

What separates Best Buy from Greece are its long-term strategies. Best Buy believes that by closing bigger stores and opening smaller, more specialized ones, it can grow as a company. Perhaps it can. The now-defunct company The Wherehouse built itself out of bankruptcy twice before eventually succumbing to Internet businesses that it never really had a chance of competing with. Other companies like Blockbuster Video made changes too belatedly and found the market had moved to far for them to catch up. We’ll have to wait and see if Best Buy’s strategy yields the results its executives think it will.

What makes Brantley Foster, as well as Michael J. Fox himself, such a likeable character is his persistent optimism, his belief that by simply rolling up your sleeves and putting your mind to something, you can pull a company – and a country – back from the brink of disaster. It is a noble sentiment, one that perfectly captures the best of the American spirit. The Secret of My Success ends with Brantley Foster as head of the company, dressed in million dollar suits and riding around in limousines. Success has found him. It has to. However, we cannot say that he doesn’t deserve it. After all, he went against the grain. He fought back the advocates of austerity and out-built his competitors. Let’s hope that kind of success is contagious. We could certainly use more of it.

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