Death spiral • Hacker News Board

Re: Death spiral

#21

Post by billswift » Wed, Jul 22, 2009, 4:43 PM UTC

synnik wrote: post #19

There are two false assumptions in his analogies: 1) That corporations don't already know this: I think most do, and cut their costs on infrastructure, overhead, and process, not on areas that impact quality and customers. 2) That the recession is permanent: Accepting a slow downward spiral temporarily while waiting for a recovery probably could make sense to the risk analysts in some corporations. The trick comes in…

Infrastructure and overhead DO impact customers, just not immediately. Overhead actually impacts more customers than any other single item or department, since it is the total of support costs for all departments.

Re: Death spiral

#22

Post by mediaman » Wed, Jul 22, 2009, 4:57 PM UTC

When a company is struggling, reversing the trend through sales growth is usually not the answer. That's certainly an important component after the emergency turnaround stage, but you have to get the business on a stable cash flow footing before doing that, and that means intelligently cutting costs.

There are many, many businesspeople who think "selling more" is the best way out of a turnaround situation. Most of them fail.

Re: Death spiral

#23

Post by poiuytrrew » Wed, Jul 22, 2009, 4:59 PM UTC

silentOpen wrote: post #15

This also occurs with semi-public services (at least in the US). For example, the MBTA ("T") in Boston serves largely those without cars: college students, tourists, people with low income. Unfortunately, due to extreme mismanagement, the T regularly decides to cut services and increase fares... and things just get worse from there. If you're a private business, you have to find a way to escape the spiral. If you're…

Pubic transport is one of the prime examples of this. We need to save money:

OK we will cut routes, put up fares, reduce number of trains/buses.

So there are now fewer people wanting to use the more expensive overcrowded unreliable service, OK we will have to make more cuts.

Eventualy you aren't actually running any trains but are still paying for all the fixed cost infrastructure.

Re: Death spiral

#24

Post by joeyo » Wed, Jul 22, 2009, 5:25 PM UTC

TrevorJ wrote: post #18

jbrun wrote: post #11

Earlier quoted context omitted.

Evolution anyone? Who has heard of an organism adapting to change by cutting their limbs off? People like stability. In fact, we are predisposed (through evolution) to think that the world is inherently stable. They think that if something has been working for 10, 20, 30 years there is no reason that it should not keep working; thus, a downturn in their business is a temporary abnormality that will correct itself. So…

"Who has heard of an organism adapting to change by cutting their limbs off?" Like this? http://www.sciencedaily.com/releases/2009/03/090325170604.ht...

Snakes are another good example (albeit they lost their legs over a much longer time scale).

Re: Death spiral

#25

Post by mrbgty » Wed, Jul 22, 2009, 6:24 PM UTC

jakarta wrote: post #12

mrbgty wrote: post #9

Why do costs get created in a company? Generally it seems that we create a cost because we think it will result in revenue greater than that cost or because we think that cost will prevent some other larger cost (such as fines from the gov't). I'm all for efficiency and maximizing the revenue we gain from each expense but we've still gotta realize that when we cut costs, we're losing something that was intended to ge…

I think it's important to look at costs as investments in the business. And if that investment will not yield a good return, why make it? Buffett famously did this over at Berkshire, where he realized that there would be no future for domestic textile mills. He took the cash flow the company was throwing off and invested it in other companies. So I think that Godin makes a huge overgeneralization, especially when he…

"I think it's important to look at costs as investments in the business. And if that investment will not yield a good return, why make it?"

Can't agree more. This was my point.

Look at those costs as investments and not just something you can get rid of to save money. More than likely, it's there for a reason, so please evaluate this expense as something that is likely producing revenue in some form or another.

In other words, you should expect your revenue to fall if you're getting rid of some expense unless you are able to successfully reinvest that expense into something with a higher return.

Re: Death spiral

#26

Post by Lol_Lolovici » Wed, Jul 22, 2009, 6:29 PM UTC

jakarta wrote: post #12

mrbgty wrote: post #9

Why do costs get created in a company? Generally it seems that we create a cost because we think it will result in revenue greater than that cost or because we think that cost will prevent some other larger cost (such as fines from the gov't). I'm all for efficiency and maximizing the revenue we gain from each expense but we've still gotta realize that when we cut costs, we're losing something that was intended to ge…

I think it's important to look at costs as investments in the business. And if that investment will not yield a good return, why make it? Buffett famously did this over at Berkshire, where he realized that there would be no future for domestic textile mills. He took the cash flow the company was throwing off and invested it in other companies. So I think that Godin makes a huge overgeneralization, especially when he…

I don't how you read the article and understood that he recommends to "keep things the way they are" as you say.

Godin stated the exact thing that you say: "Instead of squandering it in a long, slow, death spiral, do something else. Buy a new platform. Move...."

What I understand Godin says is that if you cut costs you shouldn't do that just to keep the company afloat but to invest the money you "saved" in something new.

Re: Death spiral

#27

Post by jrwoodruff » Wed, Jul 22, 2009, 6:42 PM UTC

keltecp11 wrote: post #8

Newspapers should never have disbanded their R & D Departments...

Not all of them have:

(old-ish article, but I think it's still around)

http://www.niemanlab.org/2009/05/at-the-new-york-times-prepa...

but not nearly enough kept them alive, or ever had them in the first place.

Re: Death spiral

#28

Post by rjurney » Wed, Jul 22, 2009, 8:07 PM UTC

brk wrote: post #14

jakarta wrote: post #12

Earlier quoted context omitted.

I think it's important to look at costs as investments in the business. And if that investment will not yield a good return, why make it? Buffett famously did this over at Berkshire, where he realized that there would be no future for domestic textile mills. He took the cash flow the company was throwing off and invested it in other companies. So I think that Godin makes a huge overgeneralization, especially when he…

So I think that Godin makes a huge overgeneralization You have basically just summed up Seth's entire blogging history.

Its actually impossible to make a good point on the internet without giving someone, somewhere the ability to call it an over generalization. It turns out though, that pointing out exceptions to generalizations is the lamest comment one can make on the internet, because of course, any statement to a wide audience will have exceptions that someone, somewhere on the internet can point out. Pointing out over generalizations is like pointing out spelling errors, albeit less constructive.

You can't get any traffic to your blog if you don't make generalizations, because you won't appeal to a broad, general audience.

Of course, thats all just a generalization ;)

Re: Death spiral

#29

Post by qu1j0t3 » Wed, Jul 22, 2009, 8:10 PM UTC

rjurney wrote: post #28

brk wrote: post #14

Earlier quoted context omitted.

So I think that Godin makes a huge overgeneralization You have basically just summed up Seth's entire blogging history.

Its actually impossible to make a good point on the internet without giving someone, somewhere the ability to call it an over generalization. It turns out though, that pointing out exceptions to generalizations is the lamest comment one can make on the internet, because of course, any statement to a wide audience will have exceptions that someone, somewhere on the internet can point out. Pointing out over generalizat…

Try irc. :)

Re: Death spiral

#30

Post by brk » Wed, Jul 22, 2009, 10:06 PM UTC

rjurney wrote: post #28

brk wrote: post #14

Earlier quoted context omitted.

So I think that Godin makes a huge overgeneralization You have basically just summed up Seth's entire blogging history.

Its actually impossible to make a good point on the internet without giving someone, somewhere the ability to call it an over generalization. It turns out though, that pointing out exceptions to generalizations is the lamest comment one can make on the internet, because of course, any statement to a wide audience will have exceptions that someone, somewhere on the internet can point out. Pointing out over generalizat…

Its actually impossible to make a good point on the internet without giving someone, somewhere the ability to call it an over generalization.

No, it's really not. The Internet gives you the ability to publish as much data and detail as you choose. It allows you to target a selected audience and provide information and discussion topics that relate to a specific audience that would not have been cost effective to reach in the past.

However, if you're more trying to promote yourself or your own "brand" vs. trying to provide actionable valuable data, then yes, you must generalize heavily.