Nearly 3 decades ago, as a college freshman I strolled into Global DIY leader-the Swedish Ikea's store in Windsor House, Causeway Bay, Hong Kong, and couldnt help being awestruck. Hong Kong does that to you inside and out, over and over, especially if you move through that Golden Necklace comprising Tsuen Wan and Tsuen Muen, that covers Central, Wanchai and Causeway Bay.
That be so. I wondered why India could never produce furniture of a class that Ikea was producing, or for that matter why not even a single manufacturer in India possessed the capability, business sense or foresight of Ikea.
Last week Anders Dahlvig, president of Ikea, came out with one of the smartest business quotes I've read all year in this weekend's Sunday Telegraph.
He was discussing the impact of the housing slump with interviewer James Hall. As Hall noted, many DIY retailers try to pretend that a housing downturn isn't an issue. Their argument is that if people decide to stay put rather than buying a new home, they'll simply spend more money on their existing house.
Dahlvig dismissed this with refreshing honesty. "Oh they [consumers] spend less. Overall consumption is always down, especially when the housing market is down." Now Dahlvig is of course in the lucky position of running the market leader, so he can afford to be blunt about a recession - his rivals will suffer even more than Ikea does. But it's his next comment that struck me as a real breath of fresh air.
"It is not a concern, as that is the nature of business. You have good times and bad. After sunshine comes rain. We have to accommodate that."
This is nothing staggering. It shouldn't take Einstein to understand that business goes through ups and downs. Economists even call it the business cycle. But to hear this kind of clarity amid the gibberish that most business people and politicians are spouting about the credit crisis, is infuriatingly rare.
You can't eliminate the business cycle
Gordon Brown said he'd eliminated boom and bust. We all knew that was rubbish, but everyone went along with it because he said it in the middle of a boom, and no one wants to believe that a boom is going to end.
That's the trouble. You can't eliminate the business cycle. You might be able to tame it a little - you might be able to turn "boom and bust" into a calmer, "rise and fall" sort of motion. But even that might not be possible, given human nature. Because to get rid of the bust, you also have to get rid of the boom. And as booms make everyone feel rich, no one wants to do that.
So we all pretend that the boom's not a boom. We come up with increasingly ridiculous justifications to maintain this pretence. House prices are rising because there's too little supply and too much demand. And if credit does have anything to do with it, well, that's OK, because we're now in a world of permanently low risk, and permanently low interest rates.
Maybe if we all just accepted Dahlvig's point - that ups and downs are the nature of business, and life for that matter - then we wouldn't be so terrified of booms ending.
We'd take care to prepare ourselves for the harder times while the good times were still here. If we accepted that, we wouldn't strive so desperately to keep the booms going way past their sell-by date - and in turn, the ensuing bust wouldn't be as brutal.
Why the small business squeeze is bad for us all
Of course, it's too late for this cycle. And while the Ikeas of this world can ride out the hard times with a degree of equanimity, it's much tougher for your average business person. In the first three months of 2008, profit warnings hit a seven-year high, says Ernst & Young. And life for small businesses in particular is tough.
Late payment is becoming a big issue for small businesses, says the British Chamber of Commerce. Just as the banks are tightening up, so big corporates are also paying less promptly and turning the screw on their suppliers. The Federation of Small Businesses reckons that 10% of business failures are caused simply by late payments resulting in a cashflow crisis, reports The Times.
Nearly three-fifths of private sector employees work for small businesses. Anyone still predicting that the UK can ride out the credit crunch without a rise in unemployment should take those figures into account.
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