English is not only my chosen language but, like many Americans, it's my only language. We use the same words at home, work, and in conversation and, as I tell my daughters, words matter!
During World War II the saying was "Loose lips sink ships." Indeed. Today those loose lips have turned into insider trading and prison terms. My concern at this point is that when words are used they mean very different things to the varying audiences.
Bob Doll is an iconic money manager and a special friend of an organization that I am honored to serve. Doll shared his rationale that the reason for the economy being stronger is caused by our business world having moved from more of a fixed expense to a variable expense landscape.
Fixed to variable can have many connotations from financial adjustments to shipping dates. My mind immediately raced to the variable rates on financing and bonds because that is what I understand the most. Our minds will naturally go to where we are most comfortable and we will look at the lens of the economy through that mindset. Bob meant so much more than just expenses on loans.
Ed Breen is the ex-CEO of TYCO, the ‘good’ CEO, not the one sent to prison. At the same meeting, Breen went on to explain variable expenses in an entirely new way, sharing how things were outsourced to specialists when possible, part-time employees were used if feasible, and contract employees with shorter-term commitments were used for positions that would naturally vary in need or importance over time. This may or may not sound like a good thing for a workforce but it allowed their company to survive and protect the jobs of more than 200,000 employees through a very difficult time.
It turns out that variable is also used in other ways as well. One of my clients explained in the old days of manufacturing that if a business had to make cuts in workforce or expenses that it would make those cuts across the board and often that was related to seniority. Today those cuts are made in each department based on results.
The example he provided was that if one department of the business failed to retain 10 percent of the existing business in a given area then they could expect a cut of expenses and investment - including workforce - in that area. That sounds harsh but it does put everyone in line so they understand the rules and have skin in the game.
This wasn't written so much as to discuss the difference between fixed and variable but rather to express to you and to remind me that the world is more complex than most casual observations would address. We will always move towards our most dominant thought and we tend to view the world through the lens we are most comfortable in viewing. The world is changing and some things we believed to be true may just be the tip of the iceberg experiencing change.
Joseph “Big Joe” Clark, whose column is published Saturdays, is a certified financial planner. He can be reached at firstname.lastname@example.org or 640-1524.