Too Big To Fail!

The current and past administrations have and are still using a theory that they believe is a fact that there are certain companies (i.e. enterprises) too big to fail. Their failure would result in catastrophic economic harm across the world. These enterprises include financial institutions, manufacturers, insurance companies and others.

What is the basis of this theory becoming fact? Why is bigger better and is there really any company too big to fail? We have a habit in America to "super size" everything. Big, in our American culture, has always been associated with good, with the exception of weight gain. It is not just french fires and soft drinks but in the early 60's we started to see a transformation to big stuff. As we entered the golden age where everyone could attain upper middle class living the concept of bigger is better became the course de jour for everything. We witnessed audio speakers getting bigger and bigger. Cars and trucks getting bigger. This cultural identity unique to the American perspective started spreading beyond appliances, audio equipment, and cars and soon included houses, schools, malls, airports, buildings.

So here we are with schools that encompass blocks and blocks and house thousands of students pretending that there is some magical financial maneuvering that suggest big is good because it is less expensive. Then we build huge airports where it takes longer to get through to the gate than the trip from your home to the airport. The malls went from local servicing of a community to state and then regional service capability. Wal-Mart ate up small town America because big is good and small is bad. Economies of scale was the battle cry.

We became a nation obsessed with bigger is better and this eventually spilled over to our business culture where we started building bigger and bigger companies. We rationalized it as a war in the competitive battle for global markets. If we are to win this battle big is good. We can be everywhere for everyone providing everything.

Was MCI too big to fail? Was Enron too big to fail? Was American Steel too big to fail? Was Sperry too big to fail? Is GM too big to fail? Is AIG too big to fail? Is Citi too big to fail? Is Fannie Mae too big to fail?

Failure is good. It is the counter balancing effect to capitalism. The fear of failure is what puts the fear of GOD on anyone starting or managing a business. I think the global meltdown has answered my question of is bigger better. And the answer is no. Being bigger did not prevent the meltdown or insulate these large behemoths from drowning in red ink. I think the bigger is better experiment as it relates to capitalism is dead. Big is slow. Small is fast. In complex markets speed to change and adapt is more important than size. Size is a hindrance when speed is a large part of the new market dynamics.