Tuesday, February 17, 2009

Hiding Behind the Numbers

CNBC recently broadcast a documentary, Saving General Motors.

Listening to the executives defending the company's performance, I could not escape the impression that I had heard this kind of argument before. Their claims of improving quality, increasing production, and increasing efficiency even though the company's sales had cratered sounded eerily familiar.

Such rhetoric was commonly used by industry managers in the old Soviet Union and its infamous Five Year Plans.

Shoe manufacturers, for example, would boast about the quality of Soviet shoes, about how they made more shoes this year than last year, and how they made them as efficiently as possible. Soviet shoe manufacturing was an unqualified success, at least in the eyes of the shoe manufacturers.

Unfortunately, shoe consumers did not agree. They found Soviet shoes to be of poor quality, unfashionable, and offered in just a few sizes. Given a choice, Soviet citizens preferred Western shoes, when they could get them.

The only meaningful measure of an industry's success is how much money it can make by satisfying its customers in mutually beneficial, peaceful trades. An industry that hides behind production numbers is a dying industry in denial.

1 comment:

Anonymous said...

Why Sir, You might be correct as far as history is concerned, but in Obama World we will all hold hands sing "Kumbaya" and produce GREEN cars that we all surely want! I personally like silver but if the party says GREEN who am I to complain. As Yakov Shirmnov says "What a Country"