There is a phenomenon in the business world I find quite fascinating. It is probably more common in tech and also in some healthcare startups than in bootstrapped businesses. In short, you have a bunch of guys with an idea, and investors with some money. Using investor money, the company founders try to set up a functioning business. Strangely enough, this does not necessarily need to be a profitable one as a popular strategy is to simply grow a business that has been built around an appealing product, with the hope of selling it to a big company for a lot of money. Some small tech companies were sold for a billion dollars or more. Prime examples are Instagram, WhatsApp, and YouTube. I think that WhatsApp was profitable but whatever money this company made surely paled in comparison to what Facebook paid for it.

In the best case, the founders grow a company and start making profits at some point, or sell their company to a bigger fish. However, this is not the typical outcome. Quite often such companies simply run out of money. They talk about their “runway”, i.e. how much time they have left to turn the business around before they are insolvent. This is when “big bets” are being made. There are attempts to “pivot” the product to serve other markets, and at some point there will also be cost-cutting. The effect of cost-cutting is that expenses decrease in the short-term but there is the potential that such measures undermine the health of the company overall. A simple example is reducing the number of customer-service agents. Sure, this saves money in the short term, but if customers become increasingly unhappy, they may take their money somewhere else. Cutting marketing expenses is another typical example. This leads to immediate savings but the downside is that there may be a significant drop in revenues in the not-so-distant future. At some point, recovery is no longer possible. Even if there is a runway of two or three years left, a company can be doomed already. Still, they keep going for as long as they can.

In personal finance, there are similar problems. If someone has a hard time juggling credit card debt, they may take out payday loans or use shady “buy now, pay later” services. Then there are acts of desperation, such as stopping to pay their bills. Some people really do this. I had a friend who had lost control over his life after meeting the wrong woman and falling in with the wrong crowd. He picked up an expensive cocaine habit this way. The last time I saw him was when I visited him at home, and he was freaking out because he had received a letter informing him that his electricity will be cut if he does not pay the amount he owed. In his attempts to find ways to finance his drug habit, he cut more and more corners until his life had completely spun out of control. His only good move was probably to declare personal bankruptcy.

Nation states, like companies and individuals, also need to handle money. Yet, it seems that many countries are run by people with the fiscal discipline of a drug addict. Whenever you see a deterioration of infrastructure in a supposedly rich country, you can tell that something is going seriously wrong. France and Germany have pretty shoddy infrastructure, for instance, and the same is true for large parts of the United States, it seems. I have not seen a lot of the United States, but I have seen a lot of corners that did not quite look like what you would expect from a first-world country. Neglecting infrastructure maintenance is of course an easy way to save money, at least in the short term. Maybe there was a protocol in place according to which certain road maintenance works had to be performed every few years. If politicians are more interested in bringing in endless numbers of third-world immigrants, however, they may decide that they can simply repurpose the budget for infrastructure maintenance for other political goals.

You can neglect maintenance only for so long. There is the saying, “a stitch in time saves nine”. This is is probably far too modest. More correctly, a stitch in time prevents an item of clothing to become unusable where it will no longer be able to be fixed as you do not want to walk around with a big patch over a hole. Similarly, if you neglect certain maintenance work, your investment and years of maintenance may all be negated. Physics always prevails, and if the structural integrity of a building or a bridge is compromised, it will simply collapse. I do not want to engage in overly pessimistic thinking and state that the West and its infrastructure is completely lost. We are not there yet. However, collapsing infrastructure can be crippling to a country, with snowballing effects. One key bridge collapsing leads to traffic being rerouted, which will, in turn, puts extra stress on other roads and bridges. Thus, the probability for more roads and bridges being unusable will only increase. If that happens, we will be in big trouble as there is no easy way to turn the ship around around anymore, figuratively and in some cases quite literally as well.