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URL:  http://boards.fool.com/still-great-companies-have-repeatedly-been-built-27430027.aspx

Subject:  Re: OT: Man in the White Suit Date:  2/11/2009  5:23 AM
Author:  pauleckler Number:  25935 of 35351

Still, great companies have repeatedly been built by reinvesting in the business at every opportunity. That does mean as soon as funds become available they often hire more people to keep up with growth, to get there before the competition does, to get the product sold throughout the region, the country, and in countries around the globe.

In the dot com era, maybe copious financing was available to anyone with a good plan for a digital technology or product, but many more traditional businesses are built on credit cards, mortgaging the house, borrowing funds from family members, and from the bank or someone else if you can.

Certainly this style built railroads, steel mills, and many manufacturing companies in the glory days of US manufacturing.

Our real problem is the maturing of domestic markets, the saturation of those markets, the importation of requirements, and the lack of innovative new products worth making in the US. We obviously still have some as manufacturing is still a major economic activity here. But it seems to be a declining art. How do we beef that up?

And by the way, I had a boss who said that the staff reductions of the '90s were due to all the new information systems that had been installed justified by promises of increased office productivity. But too often the people were retained in some other job or under another job title when the systems (word processing, personal computers, sophisticated phone systems, and lots of computer hardware, etc) were installed. So now they were trimming staff to realize the productivity gains promised.

You can't have it both ways. When new equipment is justified based on improved productivity, those gains are expected.

But of course, too often the gains in productivity are needed to remain competitive in the real world. Hence, the savings get passed on to customers or at least save them from cost increases they would otherwise have to pay. But then what happens at their level. Do they hire more people? Probably not. They too have competitors.

So costs get squeezed out of the system to stay in business. Productivity gain is a price of doing business.
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