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Putik Lada: Growing big on Tupai-nomics

Friday, 26 June 2009 10:52am

©The Star (Used by permission)
By PIERRE LIM VEY YEOW

Mom-and-pop businesses offering personalised, friendly services are becoming a rare species now as conglomerates and MNCs take over everything.

TIS the durian season again and for some of us it’s time to drive the pick-up truck to the fruit orchard to gather up some durians.

Or what’s left after the tupais are done feasting on the best of your durian crop.

Tupais are very clever little creatures. They can sniff out the best fruits, they are fast and nimble, they are very hard to catch/kill and there’s, oh, so many of them. And they seldom, if ever, take the bait in the traps you set.

Like the tupai, being small, focused and nimble is an advantage. All over the world today some very big conglomerates/multinational companies (MNCs) are falling over like ninepins.

The Detroit-based carmakers, Citibank, Lehman Brothers, Fannie Mae and Freddic Mac and most major airlines have taken a beating one way or another.

Quite a few have received bailout money from the US government or their respective governments, and all are very eager to quickly repay the bailout money and cut off the strings of government regulation/conditions that came with it.

Notably the conditions involved curtailing executive pay rises, bonuses and dividends.

Recent first quarter results showed an improvement in the fortunes of the big US banks but upon closer scrutiny some analysts/commentators remain sceptical, and rightly so, as accounting rules across both sides of the Atlantic have, to put it in layman’s terms, relaxed somewhat.

But if the Federal Reserve Chairman’s “green shoots of recovery” speech in early April is correct, the US economy and the rest of the world have seen the worst of the recession, and thanks to governments pump priming their economies, we have just narrowly averted a world depression.

We may not have seen the tangible results of our Government’s fiscal stimulus in the bigger economic picture, such as an increase in the employment rate, but an early indicator of recovery are the stock markets, which have taken off from their lows in February/March this year.

At the time of writing the KLSE Composite Index has climbed over 220 points or appreciated more than 25% since the end of March, and barring the unforeseeable it looks like it will continue to climb higher.

In a perfect economy, companies that fail are allowed to die a natural death.

Resources re-allocate to more efficient companies and these will then move up the ladder of success to become the next big boys on the block.

Some companies may over-diversify, lose focus of their core competencies, get stuck in ventures abroad that are money pits, and then the cycle begins anew.

Growth has been the main driving force of the modern economy and big has always been believed to be better. After all, big companies enjoy economies of scale and they command niche markets because they can. But, oh, how the mighty hath fallen.

Take banks in the US from whom our banks take their cue. If the big banks there which were caught in the sub-prime mortgage crises were allowed to fail and die a natural death, smaller banks may get to move in and take their place.

The smaller banks would be less sophisticated and offer more basic services such as straightforward deposit-taking and loans, and they would likely charge less in the way of fees and commissions and this would ultimately benefit their customers.

If they charged more, people would simply take their business elsewhere. So instead of a few big banks, there are many smaller banks and there is more choice.

This was the situation here before the series of bank mergers in the late 90s left us with fewer (six to be exact), but bigger, local banks.

The hoped-for benefits from the mergers didn’t exactly materialise and, instead, banks came out with more sophisticated products; and many would concur that fees and charges have silently but surely increased while services have become less personal and more machinated.

I’ve always been a sentimental believer in mom-and-pop businesses because they offer personalised, friendly services, and you know the owners of the business.

They are becoming a rare species now as conglomerates and MNCs take over everything from primary commodities, manufacturing, banking to retailing and other service industries.

The justification is that if there are today billions more mouths to feed, and only conglomerates and MNCs have the size and clout to produce enough to feed the world’s ever growing population.

That may be so, but even conglomerates and MNCs have small beginnings.

They take what is a gem of an idea, build on it and mass-produce and commercialise it.

All big things come from small ideas at the beginning.

The trick is not to miss the forest for the trees, which some companies do, and at great cost to themselves and the economy at large. Big doesn’t mean infallible.

Colonel Harland Sanders, the American entrepreneur who founded Kentucky Fried Chicken from a small service station in Corbin, Kentucky (in 1964 the Colonel sold off his KFC corporation to a partnership of businessmen for US$2mil), was known to have said:

“That (expletive deleted) … outfit … they prostituted every (expletive deleted) thing I had. I had the greatest gravy in the world and those (expletive deleted) they dragged it out and extended it and watered it down that I’m so (expletive deleted) mad.”

A word for the wise – don’t mess with the gravy.

The writer is a young lawyer. Putik Lada, or pepper buds in Malay, captures the spirit and intention of this column: a platform for young lawyers to articulate their views and aspirations about the law, justice and a civil society. For more information about the young lawyers, please visit www.malaysianbar.org.my/nylc

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