"Don" and "Joe" are brothers, both in their 60s, and co-owners of a company near Philadelphia that manufactures hydraulic seals. They inherited the business from their dad, who started it after the Second World War. A few weeks ago, I met with them and their vice president of sales to talk about an upcoming project. And naturally, we spoke about business, too.
Their business is booming. After sales plummeted in the wake of the 2008 financial crisis, 2010 and 2011 were record years, and 2012 is shaping up to be strong, too. China and India have emerged as major markets for them, and orders from European customers, despite all their well-advertised troubles, have remained solid. Why?
"We don't really know," said Don. "Back in 2009, we were on the brink of disaster and ready to start laying people off. It was terrible. And then, things just...turned around."
Small-business owners like me should think about that. Don and Joe have been working for this company since they were teenagers. Taken together, the brothers have more than 80 years of experience in the hydraulic seals industry. Add their VP of sales to the mix, and the three men have more than a century of business knowledge. They've managed the company through some of the most trying of circumstances: recessions, energy crises, terrorist attacks, the disco era. These are not academics. They're even better. These are men of experience. Seasoned managers. Profiteers. And they just "don't really know."
I meet lots of men and women like Don and Joe. People who are running big and small companies. Thousands of books have been written about the traits of great leaders and great companies. Academics around the world have spent hundreds of thousands of research hours trying to better understand what makes people successful. We have supercomputers that perform impossibly complex calculations in seconds. There are armies of Ivy League-trained M.B.A.'s on Wall Street working around the clock on complicated transactions. There are scientists and engineers and mathematicians and scholars who perform endless tests on the nature of our behaviors, from why we buy and where we shop to how much time we spend in front of the TV watching Workaholics. (My answer: two hours a day.)
And still, no one really knows.
Thousands of years of recorded human history. Hundreds and hundreds of recessions, depressions, and financial panics. Countless bank failures. Endless financial scandals, involving anything from tulip bulbs to Ponzi schemes. Rules, regulations, the SEC. The IRS. The Police. The Police breaking up, and Sting launching a solo career. The Police getting back together again. And still, no one really knows.
Over the course of his administration, President Barack Obama's economic advisors have included Timothy Geithner (Dartmouth grad and former president of the New York Federal Reserve Bank), Lawrence Summers (MIT grad, former secretary of the Treasury, and former chief economist of the World Bank), Christine Romer (UC Berkeley grad and a former chair of the Council of Economic Advisers), and John Podesta (Georgetown Law grad and former chief of staff under Bill Clinton). I count close to 25 other economists on the White House's Council of Economic Advisers. And, in addition to all the paid advisors, the President has many decorated economists in his circle, including Paul Krugman (Nobel laureate), Jared Bernstein (former chief economist and economic adviser to Vice President Joseph Biden), Robert Reich (professor at UC Berkeley and former secretary of Labor), and Brad Delong (Harvard grad and chair of political economy at UC Berkeley).
Not to be outdone, Governor Mitt Romney has assembled his own team of economic gurus. In fact, there are more than 600 of them, including six Nobel Prize winners (Gary Becker, James Buchanan, Robert Lucas, Robert Mundell, Edward Prescott, Myron Scholes), six Millers, four Smiths, three Browns, no representatives from UC Berkeley, but other prominent names like Martin Feldstein, George Shultz, Phil Gramm, and Arthur Laffer. The remaining economists mostly work at academic institutions way out of the reach of my college-bound kids. You can find them all at this site.
As we go deeper into the election season, small-business owners like me will be hearing each candidate's plan for growing our economy, fixing our deficit, and reducing our national debt. President Obama wants to increase taxes, particularly on the wealthier individuals, to reduce our deficit. He also wants to spend more money on certain programs (manufacturing, education, health care) that he feels will create jobs. Governor Romney wants to reduce taxes for individuals and corporations and cut the growth of government spending to a targeted percentage of gross domestic product. He believes that a lower tax and lower spending plan will invigorate growth.
Both candidates maintain that the other is wrong. Both candidates passionately believe that his opponent's policies will cause further economic problems, increase our deficits and national debt, and send America in the wrong direction. They have the numbers to prove it. And they both have a team of experts and experienced economists to back them up. After all these years of human history, how can these two smart men differ so significantly? How can hundreds of respected economists, policymakers, and wonks be so far apart on what to do to grow our country's economy and solve our budgetary problems?
The answer is easy: Just like Don and Joe, they don't really know. We are not that smart. If we were, then there wouldn't be an economic debate. Or droughts, cancer, or Shrek 4. We would be smart enough to see these problems in advance and take the necessary steps to fix them. But we don't. Because we don't know.
And this is what frustrates small-business owners. Most of us, like Don and Joe, know that we don't know. I don't know when that big customer may appear out of nowhere with an opportunity. I don't know when a key employee has an affair with my project manager until the office--and my business--is disrupted by it. I don't know that an important partner of mine is going to sell out to a competitor. Don and Joe, with all their years of business experience, still don't know what made their business come back from the brink of bankruptcy in 2009 to record its largest profits ever. And neither does President Obama or Governor Romney. They may believe their policies will work, but they don't really know.
Did economic growth under President Reagan happen because of his policies--or because of a cyclical trend fueled by a mergers and acquisitions boom on Wall Street that caused skyrocketing stock prices, which in turn added wealth to millions, which caused them to spend more, pay more in taxes, and increase revenue to the government? Did economic growth under President Clinton happen because of his policies--or because of an unprecedented technology and Internet boom that caused the same stock market/income/taxes ripple effect as when Reagan was in office? No one can argue that their policies didn't help. But how much?
That's why it's important to remember that our businesses are not dependent on who's in the White House. The President may make the wrong decisions or follow the wrong path. Or he may be right. Regardless, the American economy will continue to churn away. People will buy TVs, go to restaurants, drive their cars, and download music. They may do this less in slower times and more in better times.
The question is not which man has the better ideas and the more solid plan for our economy. The question is whether we are prepared for the outcome and thinking ahead of what business decisions we will make, regardless of who prevails in November.