Nowadays our economy is dominated by finance which is basically about the wealthy "investing" their money in hopes of making even more money, but has little to do with the nation's business. Business is also about making money, but not by investing. The idea behind business is to make money by selling goods and providing services. Business will invest, but only to produce more or produce more efficiently. Investment is the tail, business is the dog.
To understand finance, you have to think in terms of fads and trends and general moods. It's all very touchy-feely. You don't have to think about making things, selling things, extracting things, or doing things for people. You also don't have to worry about whether people are able to buy things. In finance one can make money in any kind of economy.
Business is quite different, but nowadays all the money is in finance. It was quite different in the old days. To illustrate, let's look at an old business magazine.
There's the cover:
I didn't choose this particular issue for its historical import. I just grabbed the first issue from the right era off the eBay rack. In any event, this cover should evoke the time, autumn 1963. Don Draper might have flipped through a copy, if only to check out the advertising.
If you are used to modern finance magazines, which often have words like "business" in their titles, you might get a bit disoriented looking through this issue, so I'll take you right to one of the weekly features:
It's a table of income, the sum of payrolls and payouts to potential consumers, broken out by state and compared to the same statistic for a year ago. You could probably throw this table together in a few minutes using a spreadsheet and downloading data from the BEA, but back then it took a bit of doing. Someone probably had to drop by the appropriate government office in Washington or New York, transcribe the numbers, and then spend some time with a slide rule or mechanical calculator, but there it is in a business magazine. Obviously someone bothered, and someone bothered because the business people reading the magazine cared.
That's because they were business people back then, not finance people. They made money by selling goods and providing services, and they did so in anticipation of being paid for their trouble. They knew that they weren't going to get paid if no one had any money, so a table like this one with rising incomes meant opportunity. Blood, turnip and all that.
A modern version of this chart would show falling incomes, and most people who make their living from business know that falling incomes are bad news. When the job creators announce round after round of layoffs, they know that they are facing lean times even if the layoffs are improving profit margins. The financial sorts, of course, could not care less. They know they'll get paid whether incomes are rising, falling or sitting still. Unlike Joe or Jane Paycheck, they have a government guarantee.
It's rather obvious why we all do better when we focus on business rather than finance. Unfortunately, finance rules our times, and it will take a major change to get America back to business.