Movies that understand economics #22: The Company Men

Copmany Men“[Next year] I’m worried about our stock price tomorrow.”

The Company Men is probably one of those films you missed. It has terrible publicity and was rolled out in a January (probably the worst month for movies). It’s the story of several mid to high level executives at a ship building construction firm (Ben, Affleck, Chris Cooper, and Tommy Lee Jones) as they are each downsized by the failing company and how they react to the problems of living in a recession. As you can probably guess this movie is a bit of a downer for most of the film. But in amongst the almost melodramatic moments, it does illustrate some of the economic facts and principles of the current world.
The first, as Milton Friedman was wont to point out, is that business is often the worst enemy to the defense of the free market. What do I mean by that? Well the fact is that the free market is run by three things: self interest, long term planning and competition. Self interest drives us to want the most out of what we can get, and since we want things in a free market we have to offer other people things. Competition causes us to offer the best product at the best price for both ourselves and our customer. And long term thinking causes us to create companies, products, and systems that will keep the money pouring in for years; that will grant us prosperity through prosperous times and security through the down turns. And it is this last one that the business and business in general often fail at. In general business will often foolishly push for things like tariffs or legislation that helps them and puts up barriers against their competitors…never stopping to ask what will happen in the long run after we have helped to give government the power to regulate business (despite the fact that I would say almost everyone has heard the warning “A government big enough to give you everything you want, is a government big enough to take away everything that you have.”) In this film the company at the center of the film keeps making stupid short term mistakes, constantly undercutting its ability to make anything by repeatedly downsizing all in the interest of short term gains in stock price (ignoring the fact in the long run you can only downsize until you hit rock bottom and then your stock price doesn’t go much of anywhere). Not to say that all downsizes are merely the result of short term thinking, they’re not always, but this company had no long term plans, or even desires, to keep going long term, only the short term concern for stock price.

Now the fact that people are short sighted may be disappointing, but it’s hardly surprising. That’s why the free market is great; it chews up the people without only short term thinking and rewards those with long term thinking. But the problem is that when looking at any particular business you don’t see the beauty of the free market that creates new jobs and new opportunities. (Remember this recession is more due to piles and piles of government intervention more than anything else.) Otherwise there are always ups and downs in life, only government intervention makes them worse and more obvious.

Another simple fact of economics is that people who look to the stock market as a perfect marker of the economy are really dumb. The stock market is based more on emotion and hype than any reality. Throughout the movie we see a company move its stock price up as it further and further destroys its long term prospects. I’d like to say this is just something relegated to movies and pre-Great Depression stock markets…but right now when business is about to collapse under the weight of Obamacare and all the other BS this idiot is shoveling the stock market has never been higher. And liberals keep telling me the economy is doing great… after all the DOW is above 16,000…yeah, let’s see how long that lasts. Insurance companies right now are an example of short term thinking – they are going along with Obamacare as government has promised money but this can not continue forever and so this is very short term thinking and the long term result will be exactly what government wants and insurance will be destroyed and annihilated. Wonder what that will do to the stock market?

And of course, as with all things economic it shows that the ones who survive and thrive are the ones who adapt…in this case the employees who start a new, smaller company that fills the space left by the fact that, low and behold, just firing people without any long term plan did not prevent a buyout and liquidation. Adapt or die. Adapt or die. It is the central rule of economics that can never be ignored.

“We work as hard in here every day as we did when we were trying to get a job, we’ll be alright. What’s the worst thing they can do, fire us?”

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Filed under Economics, Movies, Movies for Conservatives

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