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I like television. My wife and I love to watch programs on history, science, and yes, sometimes I watch COPS. Is that a waste of time?

Whether it’s COPS or a more elevating documentary, I have chosen to do something that will probably not improve my material, mental, or spiritual well-being substantially. Well, maybe science or history shows. At least they make me intellectually richer.

Everyone needs a break now and then, and I am certainly not begrudging anyone his/her rest time. Yet I have observed a multitude of people whose time in front of the TV is astounding. Hour after hour, they soak up images and sounds that one can only describe as chaotic and mindless.

It is not the time in front of the TV that is the culprit so much, but the things we are not doing while we watch. These same people seem to be the ones who complain about their income and lack of time. When I suggest they spend a few hours a week building a business, I invariably hear, “I don’t have time!”

Oh, really? If you want to build a business but don’t think you have time, just add up the number of hours you watch TV. And be honest. Write it down for one week. That’s right–every second, including those times you watch while eating, talking with the kids, or doing a crossword puzzle.

My guess is that you will find out just how much of a thief you have in the living room. Now, what are you going to do? For heaven’s sake, don’t swear off TV. You know perfectly well you won’t quit completely. I am not even sure that is a good idea. Just pick a few hours when you watch something less than uplifting. Maybe it’s COPS, maybe it’s sports, or maybe it’s American Idol. Decide whether your life is better spending time with them or time building your future.

If pure socialism were instituted suddenly in this country, the near-universal descent into grinding poverty would be brutal and quick. Current creators of goods and services would have no reason, moral or economic, to provide anything for sale, knowing it would be confiscated and given to someone deemed more needy. As wishy-washy as we have become, we citizens still wouldn’t allow that to happen.

The strategy instead has been stealth. The gradual ramping up of tax rates over decades has acclimated us all to a burden we would have vigorously refused a few decades ago. But, alas, politicians cannot get all the money they want to spend because that strategy has played out. They know that other sources of money have to be tapped. To that end, they steal from future generations. They can do that because those yet to be born cannot object. As the national debt (now 82% of GDP) grows, our ability to pay it back at all nears zero. The question is not if the system will crash, but when.

We got here because we as a people are largely ignorant of how the government steals from us and our children. The smoke-and-mirrors illusion that passes for fiscal management can only be sustained as long as we are gullible enough to fall for it. Every time we let pass without a thundering public outcry the nationalization of an industry (automakers), the bailing out of virtually an entire industry (big banks), and the promise of yet another unaffordable entitlement program (health care), we are partners in crime.

I don’t know about you, but I don’t want to have to explain to my two sons why we left them working nine-tenths of every year to pay back with interest money we spent. I don’t want to have to tell them that we had a chance to stop the insanity and didn’t. I don’t want to see a once proud and free country descend into tyranny and poverty because we were lured by the seductive pull of something for nothing.

How about you?

Thank heaven for failure.

Last night, I had my students do something unusual. I assigned them to teams of 3-5 people and had them do an “overnight” business. They were to take an investment of $25 and turn it into $50 within 24 hours. The only restrictions were that the business had to be legal and safe (no discount bungee-jumping).

The looks on their faces ranged between puzzlement and loathing. Almost all groups had trouble coming up with ideas, and most of them were fairly run-of-the-mill–not much creativity. Many expressed frustration at not knowing “what to do” or “what I (the professor) wanted.”

Of course, I could not have cared less how much money they made, as long as they honestly tried to double their money. I wanted them to experience firsthand the terror of entrepreneurship and the sting of failure (only a couple of groups made their goal,though most all of them made at least some money).

This morning in class, I talked about how most of us are raised with the implicit message that mistakes are bad. And they are, in a certain sense. Some mistakes, like driving drunk, are bad no matter how you dress them up. These are to be avoided at all costs. For the most part, though, not making enough mistakes is deadly. It probably means you are sitting on the couch watching TV when you could be making life better for you and the ones you love. It is safe, but is it living? Then one day your “safe” world comes apart around you and you have neither the smarts or the stamina to survive.

As we debriefed in class on the experience, I asked everyone to look around the room. Was anyone dead? Were there any serious injuries? None. “So,” I prodded, “What was the big deal? Now you know you can make money on your own without a job. Isn’t that a step forward?”

Too bad that as a country we have forgotten what my students just learned. We are pulling out every stop to make sure GM and other big companies don’t fail. Companies fail for one of two reasons: 1) they are not allowed to compete effectively because of antitrust laws and excessive regulation or 2) they are simply not providing what the customer wants as well as someone else can.

In case #1, the answer is for government to get out of the way. In case #2, it is to let them fail so that other people can provide what the customer wants more effectively. What’s so hard to understand about that? Is it disruptive? Yes. I feel for dislocated workers as much as anyone. But what happens to a society that sits on its collective couch wasting away, playing it “safe?”

Like our couch potato above, we become ill-prepared to meet even the mildest crisis. Instead of seeing mistakes as a routine and necessary part of growth, we scurry around pointing fingers at each other and ask “someone” to bail us out. One day, probably soon, there will be no one to bail us out. What then?

I don’t know about you, but I have to go. There are some serious mistakes to be made today, and I don’t want to get behind.

When I first read about being “too big to fail,” I started eating like Henry VIII. Why not? If businesses can get too big to fail, I figured I could too. Fortunately, I discovered the error in my logic before I had to get a new wardrobe and went back to building my businesses the old-fashioned way–hard work and perseverance.

Let’s think about this. How can a business get too big, much less too big to fail? The answer lies in competition. Specifically, businesses in a free market are constantly subjected to competitive pressure. If I open a business and fail to provide my customers a satisfactory product or service, they will soon find another provider. If enough of them flee to the other guy, I am out of business. That is bad for me (boo hoo) but great for customers, who now get better stuff (hurrah).

What is the best size for a business? The answer is, “Whatever works best.” There is no “right” size other than that determined by the market. Let’s take the example of WalMart. WalMart started out in the early 60’s as a barely-known retail discounter. Sam Walton set his sites on K-Mart and set out to do a better job. It worked. Over a period of years, Walton built stores in places that everyone said were much too small for a big store. He also incorporated computer technology and built an ultra-efficient distribution system.

In the end, Walton was able to offer cheaper goods to more people and K-Mart crumbled. But what about all those small local stores, the so-called Mom and Pops? The truth is, they could not (or perhaps would not) do what was necessary to satisfy their customers. In this case, WalMart’s size was an advantage. Small stores could not bargain as effectively with wholesalers or the people who delivered goods to the store. Size matters, and in this case, it was an advantage.

In some cases, size is a disadvantage. Large companies tend to become stodgy and bureaucratic, which in turn makes them less competitive. They often innovate less and respond more slowly to changes in technology and markets. Eventually, whatever advantages they enjoy from sheer size are outweighed by the disadvantages of being slow and cumbersome. They will be eliminated if the market is allowed to work.

The most obvious example of being sheltered from the market is a government agency. Governmental agencies grow large because their funds come from taxes. Taxes are not voluntary–they are confiscated and then used to pay for whatever it is that agency does. There is no reason for an agency to be reduced in size or eliminated because by law they are the only ones that can do what they do.

Less obvious are the large business entities that are shielded from competition through regulation and licensing laws. Take insurance. A person in State A may have to pay double the amount for health insurance than a person in State B. Current laws prevent some types of insurance companies from competing across state lines. As long as the company in State A does not have to worry about its customers going to the company in State B, it can charge a higher premium.

So why does such an insane system remain in place? Because politicians make sure it does. Their campaigns are funded largely by businesses that do not want to compete fairly in the marketplace. Businesses become “too large to fail” precisely because they were not allowed to fail before they got that big. Now we have financial institutions whose failure could bring down the whole system, insurance companies that can charge exorbitant premiums, and car manufacturers that make impossible promises to union members, knowing taxpayers will bail them out.

What is the solution? No restrictions whatsoever on markets. Outside preventing the initiation of violence or fraud, government should remain completely out of the economy. The companies we love to hate because they are too big to fail only got that way because our government is too big to work.

Life is full of routines. We tend to eat the same foods, frequent the same places, and even put our clothes on in the same order over and over. Disrupting our routines can be unnerving or it can be invigorating, depending on how we look at it. Try putting your pants on “other leg” first and see what I mean.

Our economy is full of routines as well. The baker knows how much bread to bake because a certain number of people routinely buy a certain amount from him/her. This allows the baker to plan ahead of time, neither baking too many nor too few loaves.

What happens when routines are disrupted in the economy? If our baker suddenly has 20% more customers than usual, it can mean running out of inventory. 20% less means waste eats up profits. On a larger scale, bread-eating trends could change within an entire economy. Think of the low-carb diets that became popular a few years ago.

Changes in routines are necessary and healthy. None of us escapes personal growth. No economy moves forward without the endless cycle of birth and death. Products and services that sell like hotcakes for years suddenly die off in favor of the “new thing.”

We cannot stop change from happening, but we can prepare for it. Think about your profession. What will current trends in technology and our social structure mean for your future? Will you job be changed radically in the next few years? Will it even exist? Write down your thoughts about how you will deal with changes in your industry. Then write a plan for dealing with those changes.

When the winds change, you want to be the one who knows how to trim the sail.

According to legend, Alexander the Great was given a puzzle, the Gordian Knot, to solve. Whoever could untie the knot was destined to become the King of Asia. Seeing no way to untie it by regular means, Alexander drew his sword and cut the knot in half.

Sometimes we operate within a set of rules that are arbitrary. Sometimes the need for the rule has long been forgotten. Alexander was not call “the Great” for nothing. He realized that the real solution lay outside the set of rules assumed by everyone else who had tried and failed.

What opportunities do you have for bold and decisive action? Does it scare you to think about “breaking the rules?” Are you worried about starting a business because of what other people will say? “But what if I fail?” You’re right. You may. Twice. Three or four times, maybe.

Professors are supposed to be educated idiots. You know, the kind that can explain how a watch works but can’t tell time. They aren’t “supposed” to start an online university. They are supposed to earn tenure and live happily ever after. As my cousin Tommy used to say, “*&^%* that noise.”

I would rather fall on my face a thousand times than stay on the porch with the rest of the university dogs. It scares me every single time I take a chance. It hurts when I fail–every single time–at least for a while. But in the end, I can look in the mirror and know I belong in Alexander’s company rather than the in that long line of timid souls who “followed the rules.”

Draw your sword. Cut the knot.

Business Models

Remember those plastic models kids used to put together? I put together a few. My favorites were fighter jets. When the model was finished, I had a replica of something much too big to keep in my room. Even though it was small, I could imagine the fighter jet in all its wonder, down to the finest detail. It was neat, being able to have a small and manageable version of something so large and powerful.

Models have a more serious use as well. Aeronautical engineers make small versions of jets before they build the real thing. They want to put it to the test and make modifications after seeing its performance in a wind tunnel and under various forms of stress. Only after examining the model’s performance closely do they risk the time, money, and lives to build a real jet.

Business models are like that. They help us see ahead of time what a business is likely to look like when it opens and after it has run for a certain period of time. Just as no model jet can reproduce every possible event in the life of a real jet, a business model cannot tell us everything that will happen when the real business is up and running, but it sure can help us tell whether it will fly.

Just as all airplanes have certain things in common, so all businesses have certain things in common. ALL businesses operate on the concept of value-added. A business takes something in, say raw materials, makes it more valuable, and then sells it for more than was paid for it. When the selling price per unit exceeds the total of the cost of the raw material and the cost of adding value, the business makes a profit.

Raw “materials” do not actually have to be “material.” An author takes his/her knowledge and transforms it into a book. One might say that the author takes paper or digital media and adds value by adding words. Words are free, at least so far, so the author creates something out of nothing. Remember that next time someone tells you it takes money to make money. Advertising firms take a product or service and increase the perception of its value in the eyes of the consumer. What a wonderful concept! Creativity pays. Hotel owners and managers increase our comfort and convenience by using a building a certain way.

Try this exercise. Look at each business you see today and ask yourself what the basic business model is. How do they create value by transforming something “raw” into something refined and useful? Notice which businesses do a good job of this and which ones need improvement. Think about how you would do things differently. Write down some ideas for improving the business models of businesses you know nothing about. Then, tell me what you learn!