What U.S. can learn from Apple?

Bangalore: Though the recession technically ends, but the Americans do not seem to be making up for their past mistakes. The U.S. Federal Reserve found that outstanding credit card debt in the nation have totaled $790 billion in the last quarter of 2010. The International Monetary Fund (IMF) has its forecast for the U.S. economic growth, warning Washington and debt-ridden reopean countries that they are "playing with fire" unless they take immediate steps to reduce their budget deficits. Cash-rich Apple can offer many tips to the debt-ridden U.S. government in financial management, says the Wall Street Journal, not the least being overcoming the "psychology of defeat".

Three step theory

What would happen if Apple had to tackle the US debt crisis, asks David Weidner who has covered Wall Street for over two decades. "First, it would eliminate spending that's not working. Then it would make a commitment to spend if necessary. Third, it would look for ideas to spend on. Finally, it would call customers' bluff. How much are you willing to pay for what the government gives you?'' he writes.

Crisis : more of a psychological problem

According to the report, the current US crisis has less to do with spending and revenue and more to do with psychology. The entire US system has "taken on a mind-set of defeat. It doesn't seem to matter that the business model - taxing for revenue, spending for growth - isn't broken. After all, it's working in Germany, Canada, India and China.

"We've given up on the model because of our debt situation. It's a problem, and a pressing one. A default or lower credit rating would cause further damage to our credit picture.''

Constant innovation and growth required

Unlike the US government, Apple, Google and Whole Foods never allowed the psychology of defeat to overwhelm them. They went through tough times, adapted and never stopped innovating and growing, according to the report.

"Apple is the most cash-rich company on the US landscape. But it wasn't always that way. Steve Jobs and Steve Wozniak borrowed money from an Intel executive to start Apple. When Jobs returned to Apple in 1997, the company was losing money. It was psychologically on the ropes. Jobs borrowed $150 million from Bill Gates at Microsoft Corp. and overhauled the company, spending on ideas that worked, killing projects that didn't. You know the rest of the story,'' says the report.

Thumbs down for long term debts

"Larry Page and Sergey Brin founded Google Inc. in 1995. The company was born out of a federal grant. Its first business funding came from a co-founder of Sun Microsystems. Then the company raised $25 million from venture capitalists. Google is also cash-rich, but it recently went $3 billion into debt because it needed to establish a credit profile,'' the report adds.

"John Mackey founded Whole Foods Inc. on a $45,000 loan from family and friends in 1978. The company was forced to borrow more when a fire destroyed its first store (it didn't have insurance). The company still had $508 million in long-term debt at the end of September.''

There are only two types of companies: those growing and those shrinking, the report says.

"The US government today has officially become the latter.''


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