Firing Your Customers

Generally speaking, while there are exceptions, you don’t fire your customers.

Oh, ask any retailer, and they will have a story of how they “fired” a customer.  They will be able to retell the incident that finally drove them to do it, what the customer did that was so annoying/disruptive/destructive, and will be able to tell you, sometimes to the penny, how much more it was costing to keep the customer than they were making from them.

Of course the reason that they will be able to tell you the story is because it was so memorable, so very much not the way they normally run their businesses.  Businesses that fire too many customers stop being businesses.

You don’t fire your customers.

This is important in understanding economic downturns and what causes them to be increasingly so difficult to get out of, and causes them to turn into “double-dip” recessions, a phenomenon that has become more common starting in the latter part of the 20th century.

Let’s pretend that the business of the world is all done by a single Company.  In this scenario, every employee is also a customer.  It is a closed system.  If the Company lays off workers, it is firing its customers, too.

So the economy does what economies have done on occasion, and slows down.  The Company responds like companies do, and lays off workers.  Ex-employees become unable to be customers, and the company suffers a decrease in revenue.  Worse, unless the ex-customers/employees are allowed to die (or are euthanized), somehow they need to be supported through their unemployment.  If you assume government intervention, that means that the other employees are footing the bill via taxes and therefore have less money to spend too, and the economy slows more.  If you assume charity will get them through, you end up with the same situation, people who donate to their fellow human being’s welfare have less to spend.

While the Company in this scenario is an exaggeration, it is becoming less and less of one as time passes.  For example, the majority of media outlets in the world are controlled by five companies.  There are only three significant automakers in the US.  And so on, with more consolidation happening every day, with larger companies either gobbling up smaller companies, or merging with their competition.

But this isn’t an anti-conglomeration diatribe.

No, I’m just pointing out the fact that, even if there were a hundred media companies, or car makers, or insert-industry-here companies, the world as it exists is also a closed system.  (The conglomeration just helps to make it easier to see.)

The Boeing employee is a Target customer, the Target employee is a Burger King customer, the Burger king employee is a Ford customer, the Ford employee is an American Airlines customer, and the American Airlines company is a Boeing customer.  And the Ford employee is a BK customer, the Target employee is a Ford customer, and so on.  So when Boeing (or Dell, or AT&T, or UPS, or whoever) lays off employees in response to an economic slowdown, they are laying off their own customers, either directly or indirectly, slowing the economy even further by cutting their own source of revenue.

Metaphorically, when the economy injures one of their legs, they pull out their gun and take aim at their other foot…. And fire.

Genius.

And so you get the double-dipper.  Something causes the economy to slow down, and by the time whatever it was gets resolved, the results of laying off thousands or millions of workers rears its ugly head.

It is happening now.  We had a financial crisis resulting from bad gambling debts on a massive scale.  It took a little time and effort to resolve the problem, but during that time, panicky employers laid off workers.  And now the economy is having a hard time recovering because the engine of the economy, consumer spending, is sputtering because the gas tank (income) is empty.

It is time that businesses grew some balls and stood strong and tall when downturns happen, instead of showing cowardice.  They need to keep their employees, even when it eats into their profit margins in the short term so that they can recover more quickly and more fully in the longer term.

Laying off employees is firing your best customers.

(There is what might appear to be a “flaw” in the scenario, but it is actually a hidden assumption, which exposes the real causes of economic downturns.  Can you see it?)

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