No business in America, from the corner dry cleaners to a Fortune 500 company would ever contemplate something this crazy, at least not without preparing the most detailed road map imaginable and getting every employee on-board – not passing massive and sweeping laws that nobody has read, whose consequences are unclear, and the majority of the citizenry is against.
By the same token, the lesson I've learned from thirty years working in a volatile place like Silicon Valley is to pray for the best-case scenario, but prepare for the worst. The smart companies around here scale up fast during the good times, but are always worriedly looking ahead for the next downturn.
That's why, Cisco's John Chambers told me a few months ago, he hoarded cash during the last boom – just so Cisco would be able to navigate through this current crash, keep its employees and outrun its weakened competition.
The best-case scenario for this economy right now is that the stimulus (or the proposed second one) actually works, the U.S. economy rights itself, and grows sufficiently fast over the next five years to absorb all of this new debt and produce enough new jobs to bring unemployment down to reasonable levels. And it is upon this best-case scenario that we are now preparing to embark on one of the most sweeping eras in government-run social engineering in our nation's history.
Leaving aside any doubts you and I may have about this war on the status quo, what happens if the best-case scenario for this economy doesn't come true? What happens if the economy stagnates or falls off a cliff again right when we're saddling it with trillions of dollars of more debt, we're dismantling the insurance industry, driving thousands of doctors and other professionals (except lawyers, of course) out of their careers, and real unemployment is hovering at about 17 percent?
I'll tell you what happens – and that's life lesson #3. Back during the dot.com bubble I was running a magazine (Forbes ASAP) that was riding right on the crest of the boom. Everyone in the Valley was getting rich, at the magazine we couldn't write enough copy to keep with all of the advertising pages, and I was paying my junior staffers extravagant salaries. I remember that we older folks on the masthead became increasingly (and properly) nervous that what we were seeing was a bubble on the brink of bursting. I also vividly remember one of my junior editors laughing at my concern and saying, "You're just old-fashioned, Mike, you need to understand that the old business rules – you know, 'profits' and all of that – are obsolete."
As we soon learned, no they weren't. And they aren't now. And no amount of magical thinking or betting on luck or assuming the best-case scenario is going to keep those laws from re-asserting themselves. You can't print and spend mountains of money without creating massive inflation. You can't keep raising taxes and assume that people will continue to work just as hard or that they won't find a way to hide their earnings – or they won't move away.