Business Cancer

My credit union has been talking lately about changing their charter. Again. It seems the board of directors is concerned about their ability to grow under their current setup.

Like many CUs, it began back around the time of the Depression, as a worker-owned organisation. In their case, it was teachers, pooling their savings to provide credit - on a not-for-profit basis - to each other. (A bit like the Baileys' Building & Loan in It's a Wonderful Life.) You had to be a teacher to join, and by providing services only to members, they weren't subject to the same rules as banks. Over time they expanded their membership base to include all employees of educational institutions and students, set up cooperative arrangements and joint operations with a local medical employee credit union, and so on. Last year they revised their charter, becoming a geography-based institution, open to anyone in the surrounding four counties. They're now one of the (if not the) biggest credit unions in the area. But that's not enough.

The information they've been sending to us members has gone on and on about growth. The regulations of the current charter, and the government regs placed on CUs (as opposed to banks) are inhibiting growth, they say. In order to keep growing, we need to change. It's necessary in order to compete... to survive.

Maybe. The "financial services industry" isn't my area of expertise, and they may be right about it. But if so, it seems symptomatic of a larger problem. As a society we're so obsessed with the idea of "growth" that we forget that the word isn't necessary as positive one. "Growth" can also refer to obesity. Or cancer.

Another anecdote: My first real job was working for a local retailer. They'd started a generation earlier with a single store, selling women's clothing. It was a classic immigrant success story. They did so well they opened another store. Then another. And several more. By the time I started working there the original owner had passed on, and his sons were running the business. They had a few dozen stores all over the state and in nearby states. Business was good. Really good. But that wasn't enough. They kept opening more. They went public, selling a bunch of stock to fund their expansion campaign. They had their sights set on becoming a national chain, coast to coast. But they over-extended, lost sight of what had made the stores successful in the first place (mostly loyal local customers to whom the name meant something), started losing money, had to close stores, laid off huge numbers of employees, and eventually collapsed. Not even the hometown stores are left.

In other words, the business turned into a cancer, grew too much, and killed itself.

It's the American way. Hell, it's bigger than that: it's the modern international way.

Growth doesn't have to be a bad thing. If there's nobody selling flapjacks on the other side of town, leaving people to make their own and/or drive across town and crowd your Jack's Flapjacks restaurant, and you open another location over there, that's probably a good thing for everyone. If there was another flapjack shack with lousy cakes and you put them out of business, that's just competition doing its thing and most people in town will come out of it better off. But if you're expanding to the other side of town just to take over business from another good flapjack joint, no one really benefits except maybe you. Likewise if you buy out the other guy so you can "grow your business". And it's even less beneficial if you sell your business to the growing national Flapjack Shack chain.

The problem is that we seem to see a lot more of the latter kinds of "growth", but both are praised and rewarded as if it were all the same thing. So we get market-dominators like Clear Channel buying up local radio stations, or Microsoft taking over one software category after another (and moving now into hardware and services). We get former competitors buying each other out and merging, like the huge "Baby Bells". Which is not to mention ridiculously large conglomerates like AOL/Time/Warner/Turner (which barely begins to list the range of their ownings) or GE (whose holdings range from TV networks to financial services to military contracts to home appliances to communication satellites to healthcare equipment). Comcast wants to buy Disney which already owns ABC which owns production studios and local broadcasters....

It's true that these surviving companies are very efficient. But efficiency is overrated; it shouldn't be an end in itself. In fact, too much efficiency is bad for things such as... people. It may be more efficient to make all of the world's hamburger patties in a single plant and ship them out. But that puts all the patty-makers in the rest of the world out of work. A single ISP might be more efficient, saving the redundant effort of stringing multiple cables to every home, but it makes us all dependent on them. A single operating system might offer the efficiency of letting software developers write for a single platform, but it gives the developer of that OS too much influence and leaves us all vulnerable to whatever security problems it has.

The analysts who cover the business scene (who are themselves employed by large media companies, but let's not go into that particular conflict of interest right now) excuse this as wholesome market competition in action. But it's more like the end result of competition. This is what we get when competition has run its course, when all that's left are the strongest, most resilient tumors.

This "end result" may be inevitable in the long run. But so is death. That doesn't mean we should just embrace it. We fight cancer. A wise person quits smoking, eats plenty of fiber, and avoids known carcinogenic chemicals. And if a person does develop cancer, we treat it with whatever tools are effective, including surgery, chemotherapy, and targeted radiation. We ought to do the same with business cancer: discourage the behaviors that increase the risk of it, encourage activities that keep it at bay, and outright ban the things we know will cause it. And when a business starts to grow cancerously, either cut it up, suppress that growth into remission, or kill it.

That may sound extreme, but it's often the threat of extinction in competition with these cancerous corporations that forces smaller, saner, and sounder businesses to go cancerous themselves. The cancer metastizes, and becomes systemic. As far as I can tell, that's what's happening in the financial services industry. I switched to a credit union after the local bank I'd grown up using was engulfed into one of the big nationwide banks, a victim of banking cancer. Now my CU is threatened by that, and seems prepared to become a cancer itself to survive.

One nice thing about credit unions is that the "customers" are also owners, so as a member I actually get a voice in this move. Needless to say, I'm voting "no".