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Tuesday, February 10, 2009

Entrepreneurs, Bubbles, “I Know what I’m Doing,” Frugal Dad

“The time is out of joint”: so says Hamlet, lamenting, "O cursèd spite,/That ever I was born to set it right!" (1.5). Luckily, unlike Hamlet, I don’t have the responsibility to set anything right, outside of my own very limited sphere of influence.

But, in honor of our out-of-joint time, I present a disjointed series of thoughts economic, entrepreneurial, and other, ending, as Hamlet begins, with the ghost of a father.

Shabby Chic: while noodling around the blogosphere, I came across a notice of a fabulous sale at Shabby Chic, the super expensive furniture and accessories store. Why the sale? Because the business is in chapter 11. Founder Rachel Ashwell’s blog entry on the financial troubles of her company is heartrending, truly poignant: she refers to herself as a “flea market girl” with a dream caught up in a complex business in difficult times. I read some of her books (library copies!) back in the day: I was impressed by the coherence of her vision. Then I read some comments on the blog Apartment Therapy. There were a few acerbic ones, noting that for a flea market aesthetic, her stuff was awfully expensive (true dat!). Also noted was the fact that her business, born in affluent Santa Monica 20 years ago, perhaps rode the housing market, expanded out of control, and then burst, like the rest of the bubble.

My Dinner with Andre: Andre is someone I knew slightly. Our chat dates to the late 1990s, as will be obvious. Andre’s husband was the scion of a New Orleans family known for a chain of furniture stores, then recently defunct. I’m not sure if he had a job or lived on the proceeds of the business. Andre said, “I know I should get a job, but I make more money playing the stock market than in any job.” I, envious, since the mutual funds in my retirement accounts never achieved spectacular returns, said, “Ooh, could you tell me what you do?”

She said, “I just know what I’m doing.”

Bubble, anyone?

The House Down the Street: A nice but shabby house down the street sold a few years ago to serial flippers. They fixed it up and decorated it in shabby chic style, as it happens. My son worked on the house for a while, in the company of two high school friends who had been hired by the flippers. One of the boys explained that the couple bought houses and sold them for huge profits, which they used to live on and to buy the next house.

He said, “They really know what they’re doing.”

The house was put up for sale at a huge price, now reduced by a third. Need I say it remains unsold?

EBay: My experience with EBay is strictly anecdotal. About seven years ago, I had a pair of Birkenstocks that hurt my feet. A student said, “I’ll sell them for you on Ebay!” At that time, listing was difficult, you had to have a digital camera, you had to find a hosting site for your pictures, and you had to take checks. So, selling was very challenging. The shoes sold for $70.00! I spite of the difficulties, I sold a few other items, and was always amazed that my several year old clothes generally sold for what I had paid for them. Cool. I really felt that I knew what I was doing.

Now the selling is easy: EBay hosts pictures, everyone owns a digital camera, EBay owns Paypal, etc, etc. A few years later, I found at a thrift store the same Birkenstocks I had previously sold—same style, size, everything. With visions of $70.00 dancing in my head, I put them up for auction. I got $7.00. The buyer left me a positive rating and said, “Thanks for the great deal.”

Interestingly, my anecdote is quite in line with the business fortunes of EBay and its sellers as recounted in the financial news. Sellers are angered by the huge fees EBay levies and by the low prices that most items command. From my perspective, I’d say the problem is that listing is easy now, hence an oversupply of goods. For buyers, why bother paying a lot, since hundreds of identical items will be listed later. Did the sellers know what they were doing? A bubble, once more.

My frugal Dad: It’s fitting that I began with Hamlet, which is concerned with that “common theme" of "nature,” the death of one’s father(1.2). My frugal Dad died suddenly in November. Perhaps one reason that I have always been skeptical of people who say they “know what they’re doing,” is because he was always skeptical. He was a very intelligent man, one of whose greatest points of pride is that he attended the famous magnet school in New York, Peter Stuyvesant. But he was always very modest about his own intelligence, always pointing admiringly to the intelligence of others. This is, as most of us know, an unusual attribute.

My father was an entrepreneur for a while. First he owned a business with a partner. Later, after working for a company in Philadelphia for a year, he started his own business (market research) in around 1965. He had an office in New York. The employees consisted of my father and a secretary, plus, after a bit, my mother. Occasionally he had temporary workers. He paid very well, and I and many of my high school friends reaped the benefits of a $4.50 hourly wage.

After about 12 years, my father decided to close his business. He had had some very bad years. A few of the people who had passed work on to him had opened competing businesses. There was a recession. I asked why they were closing, and my mother said, “We don’t want to lose our savings.” What savings?

Little did I know that they had had a few very good years. The reason I didn’t know that was because our visible standard of living did not change. They saved.

I’ve been thinking about this because of all the stories about people in their 20s and 30s who have gone from making high salaries to hard times. Many of these sad stories feature mortgage brokers and people otherwise in the real estate or banking business. (“I worked hard! I knew what I was doing!”) This does not even include the upscale tales of the now-unemployed MBAs who worked in investment banking, and, supposedly knew what they were doing. (Which is why there is a shriek of pain at Obama’s proposed pay caps for executives: “But we’re worth it. We know what we’re doing!”)

My father, I now see, had the gift of modesty; he never thought he knew what he was doing. He saved during the good times. Thanks for the fine example.


lei said...

Oh my. I'm hearing a "better than thou" attitude loud and clear in this post.

Frugal Scholar said...

I apologize if it comes across that way. I meant for this to be a tribute to my father, who died 3 months ago today. He was a modest man. I will read this again in a few days. Could you tell me in particular what parts offended you? Then I can edit them.

Midlife, menopause, mistakes and random stuff... said...

Hold on here.........there is no "Better Than Thou" attitude going on here at this blog!!

That was a beautiful tribute Frugal Scholar. I wouldn't edit anything. This is YOUR story and YOUR thoughts. If someone else doesn't agree or want to read it then they should just move on to the next blog and insult someone else.

You take care and blog your tue feelings girl ;=}

Steady On
Reggie Girl

The Fabric Bolt said...

It seems that years past are "out of joint" in that there was so much which was unrealistic in gains, profits, expectations and like you state over and again...the bubble burst. Your snippets bring back some interesting memories and also some prudent warnings - more often than not, slow and steady wins the race.

lei said...

I responded to your reply to me in an email and realized too late that I should have responded in the comment section. So, I shall do so here.

Oh, I was not offended! I see it as you expressing your opinion and me expressing an opinion on your opinion. (Whew! Does that make sense?)

I "heard" that entrepreneurs who make big bucks though they knew it al and they really didn't. I "heard" that you felt somehow superior to them.

I admire entrepreneurs -- the rists they take and most often the extreme hard work they put into having a vision come to cruition. They are dreamers who go beyond dreaming; they set goals and expend energy and often muscle and sweat meeting those goals. Our world would be a much poorer place in every respect withou them as it would be poorer without artists and academians.

Of course, this could lead us into another topic entirely: Greed and the chaos and pain it can cause.

Please don't feel you have to edit. You wrote something that bothered me and I had to stop and think why it bothered me. I appreciate anything that makes me think whether or not I agree with it.

And, lastly, my heartfelt sympathies for your loss. Losing a loved and admired parent is always difficult.

This is a post script to Midlife, etc. My dear, trust me -- If I had meant to be insulting, there would have been no mistake about it. Just as your comment was unmistakably insulting to me. mine would have been.

lei said...

Wow. Should have check the spelling on my post before I sent it. That's what comes from replying to something when upset.

Duchesse said...

The word that comes to mind as you recount those failed businesses and speculative investments is "hubris".

Business failure is usually a multi-factor problem. I've felt some schadenfreude when retailers with insane markups go under.

The words that come when I read of your father are "humility" and "decency".

Frugal, don't edit to assuage someone, don't apologize, don't worry about offending a reader's sensibility. Write your truth.

lei said...

OK - That does it. Lesson learned.
Apparently it is not appropriate to leave anything but excessively complimentary and positive comments on blogs.

My feelings did not need to be assuaged, I did not require an apology, my sensibilities were not offended and I certainly did not mean to insult you. This is my last comment of ANY sort on ANY blog.

Over the Cubicle Wall said...

Not to get tangled in the fray, but one part of this post stood out to me. The limit to executive pay. This was done before, and helped in large part to spawn the concept of stock options as an alternative means of compensating an executive who just had their salary limited by legislation.

Stock options led in part to those same executives running companies into the ground by pushing strategies that buoyed the price of the stock above all else. Quality, employee job satisfaction, and pride, pension, and retirement health benefits all took a hit in the name of short term profit so that stock options could be exercised.

The legislators knew what they were doing, but as it turns out, so did the executive. Hope it works out better this time, but unintended consequences have a way of getting in the way of the best of intentions.

Frugal Scholar said...

@Cubicle--I didn't know all that! Your explanation is so clear. Thanks.

@Fabric--I think you may be right. The past was the out of joint time. Thanks.

@Duchesse--Hubris may indeed be the right word. But it is so hard to see businesses fail . . .Thanks for the kind words.

@Midlife--Thanks for the kind words.

@lei--Please come back and feel free to comment! I am a writing teacher and I am always amazed at how hard it is to communicate. As Edgar says at the end of King Lear: We should "speak what we feel, not what we ought to say." Or something like that! Thanks for your thoughtful comments.

Midlife, menopause, mistakes and random stuff... said...

Lei; I agree with Frugal Scholar. Come back!! I invite you to my blog as well. I was in no way trying to insult you. I was trying to take up for Frugal Scholar and her touching tribute to her father. I just thought that maybe your comment was a little abrasive?
My own father died when I was 13 years old and her post spoke to me. Spoke for me.
Come back to commenting Lei, sometimes people's words don't come out the way that they want them to and I'm sure that you didn't mean anything demeaning ;=}.
Blogging is our forum to speak our own truths regardless of how other people feel about our truths. They are our feelings and we own them.
I hope that you understand where I'm coming from and hope that you will visit my blog. Mean it ;=}

Chance said...

What an amazing tribute to your dad! At three months, the loss must still be acute, I'm thinking of you. Thanks for the great post, it is making me think this morning.

Duchesse said...

Lei: My remarks do not pertain to solely to you as commenter nor to Frugal Scholar as writer.

When I censor myself because someone might reply with a critical comment, I will write a very safe, very watered-down blog. Not my cup of tea. Nor am I writing for compliments and positive comments. I do appreciate civility.

I don't think people reading Frugal Scholar mind debate and difference, and I would welcome your further contributions.

Frugal Scholar said...

I offered to edit/revise because, if I'm coming across as "better than thou," I'd like to know! I have written a lot over the years, but I am still surprised when what I thought was so clear turns out not to be(like the last sentence?).

Thanks to all.

WendyB said...

Thanks for stopping by my blog. Lovely tribute to your father (And true that things have REALLY changed on eBay.)