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Last week I got two letters – one from GE Bank (that provides credit services for Lord & Taylor) and one from Chase. Both were somewhat apologetic and notified me of the credit line cut. In fact, they cut it so much that the credit limit is barely above the balance on the card.

Now, I don’t claim to have a credit score of 900, but it was a decent enough score, especially for a current economy. With lines cut like these, my credit score will undoubtedly plunge – because the integral part of it is an available credit to total credit ratio. As you can see, with a simple move two credit providers have just destroyed about 75 to 100 points of my credit score.

What does it mean in a long run? Well, I expect some more credit cards to do the same (although I don’t have that many anyway). That should bring my credit score down even more. Inevitably, some of the credit lines will get so close to the balance that cards get accidentally overdrawn. That pushes the score even further down. In a two to three months I expect my credit score to nosedive by no less then 150 points, with even more diving in the following months. There’s almost nothing I can do  to prevent that. Obviously, if I was capable of paying off all the balances – I would have done that a long time ago, but I would still need some credit for operations anyway.

So what these credit companies are looking at is in approximately 3 to 4 months driving my credit score down so much that I would stop caring about it. Then, an interesting thing happens – once you stop caring about your credit score, you realize that you can just stop paying credit cards, free up a lot of cash, stop answering calls from credit card companies for about half a year (imagine all the cash you can save by then), wait until your debt is sold to a collection agency, wait out a little longer and then make a deal on paying off just a fraction of the initial debt.

Once you’re done settling (even before you’ve paid off your balance) – your credit score will start to raise, in about a year you’re back to the previous numbers without the debt and with whole lot of cash. Credit company looses, you win.

Now tell me – what’s the rationale behind the initial action of the credit company to cut the credit line of an individual (or a business) that makes all the payments on time and always pays significantly more then a minimum payment? Does it all make sense? From my point of view – it doesn’t.

Part 2. Click for part 1.

Now would be a good time to ask me where is the fix? All I’ve been talking about so far is why we are in the mess we are in

From the entrepreneurial perspective – we have ineffective management. It’s everywhere. Not only the government suffers from this – major companies are settling for ridiculous levels of idiocy in their decisions. Probably because that’s what pays the most – immediately. In the long run, however, it’s not all that bright and shiny.

The big three automakers can’t get it into their system that people buy American trucks simply because people need them and there’s little to no alternative to them. And people buy Japanese cars because people want them – for higher efficiency and reliability for the same (if not lower) price . Out of the curiosity and nostalgia I always rent a different American car when I cannot travel in my own car. So far the experience is next to horrible. These cars have less sex appeal than President Bush and are less comfortable than a torture chair. I’ve been through Pontiacs, Fords, Chryslers and Chevrolets, varying among cars, SUVs, vans and trucks.

The outsourcing of high-tech jobs, R&D and pretty much anything where you have to use your brains damages the overall state of economy. I closely work with people who either manage outsourced teams or do clean ups after outsourcing’s epic failures. For every story about successfully outsourced project I hear two about failed ones. From the short-range-profit point of view the outsourcing is great, but when you take longer terms into consideration – outsourcing is less effective and costs just as much if not more. There’s a reason why business owners prefer working with people locally, and that is – easiness of communication, staying in touch and fast resolution of issues, which in the long run costs less than just cheap execution. Talking to someone, who’s English is a second or third language and who’s only incentive is to work for as long as they can so they can suck all the money they can will hardly yield anything useful. Besides, this is just handing our own competitive advantage to our competitors on the silver plate with a golden rim. And we are even paying for that!

So all that we need to do is create more jobs in the country. More people in the country will make money (and more people will be making more money than they are now), so the blood of the economy will start circulating again. This is not a short term solution, nor it would benefit all people at once overnight. But it’s surely a way to go.

If lawmakers, instead of passing a bailout (which reminds me of the old saying that you can’t heal a dead with a poultice) should concentrate more on having a law that will reward (with tax breaks maybe?) companies that create and maintain jobs in USA and punish those that dump them overseas. From my perspective – it’s a matter of language of the law how it’s done, as long as it’s done.

CASE STUDY: WORKPLACE TRIBE GONE WRONG (originally for Triiibes).

The place I work for right now is all about team building. At least that’s what I was told during the hiring process. Even more so, after a whole-day round of the interviews I got another call from HR and one more “team participation” interview. Given that I am coming from independent consulting background I sensed nothing wrong, until I arrived.

Among first impressions that I’ve been put through was the all-employee meeting. Most of the meeting, though, concentrated on Sales Team. They occupied first forty or so rows of the expensive conference hall while pretty much everyone was happily dozing in the back. The whole talk was about the sales team and the finance team. They made good tribes, I guess.

Then, after much talk-around, the Q&A session ensued. One of the hottest topics was the cancellation of “casual Friday”. Turned out – many employees considered this a valuable perk (I used to wear pretty much anything as long as I got the job done the previous 10 years of my career, so I didn’t really took note until now). The CEO proclaimed that “yes, you don’t wear jeans on Friday anymore and let me tell you – you look great today”. Ask me – that sentence alone alienated exactly half of the company’s employees. Those, who don’t belong to sales and finance, made faces and whispered comments. Obviously, we all were sitting too far away for CEO to take note. As to the sales team – they have to wear their uniforms every day (even on Saturdays), so it’s not like the “casual Friday” policy was affecting them in any way before or after.

Being a newbie in the company I did a lot of asking after the meeting – talked to my peers, colleagues from other departments, even managers. What I was inquiring about can be essentially put as this: “Is the behavior this whole tribe exhibited during the meeting something regular or is it something new that no one really had a chance to get used to”. As I figured out – this was the first attempt to divide the large tribe into smaller ones and conquer only those who’s performance really mattered.

As I retreated into my smaller department tribe I realized that the reason why the divide and conquer paradigm worked pretty well for CEO is that because interdepartmental ties are quite similar to medieval relationships between city-kingdoms: “we’re not invading them because we can’t really keep that part of the land occupied”. Such truce-because-we-can’t-wage-war relationships are the reasons why any tribe can be divided and conquered into any number of smaller parts. And those are so much easier to take over…