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Comment by mlthoughts2018 | Hacker News Reader

mlthoughts2018

There should probably be a sense in which it is criminally negligent to run a business of this size in such a way that a ~6 week period of market crash behavior can imply a need to to layoff 90% of staff.

I understand businesses have to make tough choices, but this seems like egregiously irresponsible planning, akin to using every paycheck for exorbitant luxury while figuring you can use a credit card for necessities and coast on some equilibrium of credit card payments.

It’s ridiculous for large corporations like this to not have sufficient reserves to ride it out for lengthy periods of time while disallowing “lay everyone off” from being a side effect.

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That is impossible. No business can see a 50% drop in revenue over an extended period of time and survive. That is, unless we assume that the price setting function of markets is suspended. Supply and demand will result in razor thin margins unless we get rid of competition and allow monopolies.

Is 6 weeks really an "extended period of time" ?, we are barely a few weeks into a global crisis and already companies are collapsing, that's an indicator of just how insanely fragile things are.

6 weeks is a damn eternity. Modern supply chains are stupid highly optimized.

highly optimized means insanely fragile in terms of disruption.

If there was absolute certainty that the disruption would only be 6 weeks then a business could take the hit and recover over time; this may be a longer term drop in demand such that they have to make drastic cuts immediately.

British Airways is calling on the government to not bail out it's competitors. They are sitting on $9Bn in cash.

Many countries have companies that are strategic assets that will be protected in crisis, auto manufacturers, farming, airlines, banks etc. This means that they are some times shielded from the full force of market competition. I would be curious about British Airways posture.

Presumably since Brexit is happening, their word only carries weight in the UK, and they are the strategic asset there.

They probably are hoping totally private competitors like Ryanair are gone, so they can buy their planes and fly their routes.

British Airways is totally private, the state unloaded it a long time ago. My understanding is Ryanair have a reasonable cash position. Virgin have the begging bowl out at the moment though.

Good. Let fiscally irresponsible companies fold. There should never be government bailouts for anyone.

I’m with you on this, but then it should be executives and shareholders required to fully support unemployment for the workers affected by the company failing due to financial mismanagement.

Instead we see executives get out with huge severance or even just accumulated wealth, and stick taxpayers with unemployment bills.

In a financial crisis every company is at risk, without support, you get a fire sale, and the cascading effect takes down more than just the irresponsible companies. The time to regulate irresponsible action is before the crisis not during the crisis. We learned that in the 1929 Great Depression. There is a lot of research to that effect. We saw that in the recovery from 2008 which used the lessons learned about 1929 to adopt different responses that the 'liquidationists' recommended (google that term and you will see your exact argument used and followed by the government in 1929 and the devastating effect it had on the economy).

The problem isn't the trailing 6 weeks but the upcoming {unknown} weeks of little to no travel. It makes no sense to bleed money indefinitely out of generosity to your employees. This pandemic is what a social safety net is supposed to exist for.

I agree with you this is precisely what a social safety net is for, but given that the United States seems to be vehemently opposed to universal health Care and UBI, there should at least be regulations in place to ensure the businesses we depend on aren't operating on the edge of bankruptcy. The whole argument against government safety nets is that companies will take care of their employees in a time of crisis (I disagree with this idea, but we hear it all the time).

> The whole argument against government safety nets is that companies will take care of their employees in a time of crisis

I don’t recall ever hearing the argument that companies should pick up the burden.

But there is a lot of literature suggesting people save up for a ”rainy day”:

https://en.m.wikipedia.org/wiki/The_Ant_and_the_Grasshopper

https://www.biblegateway.com/passage/?search=Genesis+41&vers...

This is a really interesting idea and I like it.

It naturally reminds me of reserve requirements for banks.

Couple of major considerations come into my mind, some of which I think you touched on: - Would have to rethink private business financial reporting because private businesses (in the US, anyway) have to share much less of their financials to the public & government. - I'm assuming there'd have to be gradients of how this is applied. I mean, big companies like Uber and Tesla operate at a huge loss for years after their startup phase, intentionally, to grow their capital and tech, in the hope of being a profit-center eventually. - To your point, maybe such rules would apply primarily to mission-critical industries: airlines, hospitals, telecom/internet, fuel/utilities/water/electric. - Maybe you get an exemption up to X employees, and it doesn't kick in until Y years after opening. Like, if you can't find profitability after 15 years, then something, something happens?

I don't know, cool thought.

There is, but instead of putting this requirement on the companies (making it more expensive to hire), the government supplies the guarantees.

So in a situation like this, companies can temporarily let employees go home without pay and the government pays them.

You could argue that a reserve requirement would be better (e.g in order to hire someone a company must place 6 months pay in reserve), but that would just put a lot of capital to no use.

A layoff is not necessarily temporary. You’d need a system that compels the company to hire them back at their previous wages / benefits, or not allow any kind of “terminated” status but just transfer payroll (at a reduced rate) to the government.

Firing + collecting unemployment is not the same as requiring fiscal responsibility, not even in terms of superficial intentions.

These Norwegian ones are temporary and surrounded by a lot of regulation. Effectively the employer doesn’t provide any tasks nor any pay, but doesn’t end the employment. It’s a suspension of employment rather than an ending. Such a suspension obviously only has any meaning in a situation where being employed actually brings security. For example, the company can’t hire other people.

How do you compete against other firms that aren’t earning so much that they can ride out a pandemic?

I can only imagine an economy where almost no business could ever legally exist.

What has that got to do with my comment?

The flights are canceled. There’s nothing for the employees to do.

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