Jesse Livermore had a great tweet:
I think this tweet was a response to Henry Blodget’s post on job creators:
“Now, again, entrepreneurs are an important part of the company-creation process. And so are investors, who risk capital in the hope of earning returns. But, ultimately, whether a new company continues growing and creates self-sustaining jobs is a function of the company’s customers’ ability and willingness to pay for the company’s products, not the entrepreneur or the investor capital. Suggesting that “rich entrepreneurs and investors” create the jobs, therefore, Hanauer observes, is like suggesting that squirrels create evolution.”
I have been saying this for years – businesses hire when they are swamped with demand, not when they have high profits. I’ve been tweeting this for the last few weeks to attempt to get more traction for it, and blogged extensively about this for such a long time. It’s great to see people start to take this idea and run with it.
Businesses do not hire in large quantities for any other reason other than high demand for their products/services.
Recognizing demand drives employment does not diminish the importance of business owners or entrepreneurs. Business owners respond to demand because they have good judgement. They innovate products and services due to their smarts and high motivation.
The smart thing to do is to respond to demand – Steve Jobs found this out with the failure of the Newton vs. the success of iPod*. Good business owners try to make money in a stable and repeatable fashion, and then make as much money as they can while doing this. Maximizing profits does not mean hiring people, although it might.
The economy needs people and companies who can make stuff, and provide services. **
Recognizing the importance of demand does not diminish the importance of making stuff. Innovation is easier when you’re already making something. You can then see the good and bad of the design and make incremental improvements to the design or the process.
Update: Steve Roth clarifies some ambiguous thinking and language I had on how business people responding to demand. Turns out many business people respond to quantity signals more than price signals – and there is a long history on responding to quantity more than price.
(*Steve Jobs and the ipod -> iPhone -> handheld computer which is the iPhone 4 was genius. He rode demand until he was able to show people what they wanted.
**But when has this ever been an actual problem? When have companies refused to fill a demand gap which exists in the market they are able to fill? As far as I can see in the data, this has never happened. Not many people think this is a real problem. )