Government can do one of two things to business, it can expedite its growth by creating an environment with low taxes and minimal regulation or it can make taxes, permits, and regulation that are nothing more than roadblocks to entrepreneurs.  On a vacation to Kauai, Hawaii, this simple fact was demonstrated. Kauai is a beautiful island known as the “Garden Island”, and it is luscious, green and magnificent.

On Kauai, there is the Kauai Cigar Company, which was born out of the Blair Estate Coffee Farm.  According to the marketing brochure for the cigar company, the company is a place where “diversification and expansion are part of the intrinsic spirit.” You can read this to mean that they are an entrepreneurial group of people that run the company/farm.

But what really hit home was a message that you find later in the same brochure: “While it took nearly 6 months to obtain a federal permit to manufacture and sell cigars, the reporting, bi-monthly federal taxes, and whopping nearly 40% Hawaii wholesale tax made it financially impossible to hand make cigars in Hawaii.”  So what did these entrepreneurs do? They found a company in Nicaragua to roll and manufacture the cigars.  While a testament to the fact that the world is flat and that entrepreneurs will not be stopped by government silliness, it also demonstrates the backward thinking of many governments.  Instead of having jobs in the U.S./Hawaii for this work, the Kauai Cigar Company ships their cured tobacco from Hawaii to Nicaragua and then back to the U.S.  While we can congratulate them for their creativity and ability to make their business work, we have to shake our head at the stupidiy of the Hawaiian and U.S. governments.

We are in the midst of one of the great economic meltdowns and revolutions of our lifetime.  The financial markets crisis that has seen Lehman Brothers go bankrupt, AIG on the brink of collapse, and JP Morgan Chase sold at yard sale prices has sent reverberations throughout the business world.  The dollar is weakening on a daily basis, and the credit crunch is hitting main street.  This is an economic ice age.

And like the ice age that brought on the extinction of the dinosaurs and precipitated the rise of the mammal to the top of the food chain (note: this is the WV scientific take on dinosaur extinction), we believe the same thing will happen in this meltdown.  Small start-ups are going to be like the furry rodents that scurried around the jungles of the Jurassic Age.   As the large T-Rexs and other raptors (think large financial behemoths) fail to adopt and adapt to the change in climate, small, more agile creatures do find a way through.  The greatness of start-ups is that they can find holes in the cracks of an economy.  And like the early mammals, they also will evolve and grow into the dominant economic force.

So, as the bad news continues to grow and reverberate on Wall Street, think about the ways you can evolve and adapt.  Start-ups are just the small, furry, agile creatures of this ice age.

Have you been following the saga of the 14,000 taco trucks in Los Angeles? Let’s give you a synopsis:

The County of Los Angeles has 14,000 mobile trucks that sell food in neighborhoods. They offer mostly Mexican-American dishes (e.g. tacos) that are inexpensive and simple. Well, recently, in its infinite wisdom, the county board of supervisors voted to make it a crime if a truck stayed in one place for more than an hour. This measure was supported by the local chamber of commerce, and it was passed unanimously by the 5 supervisors.

The logic was that the trucks, with their inexpensive menu and low overhead, were forcing brick and mortar restaurants to close. So, they imposed a fine of $1,000 and/or 6 months in jail if they didn’t move every hour. Armed robbery or drunk driving probably gets you 30 days, but sitting your truck in a place for an hour gets you 6 months!

The part of the story on which we want to concentrate is the economics of the situation. If government passes laws that make it harder for licensed, regulated, inspected food vendors to deliver their wares, the only loser is the consumer. Food the consumer wants would become more expensive artificially.

If a mobile vendor has determined a better and less expensive way to deliver his or her food, then let the market factors determine that. If traditional restaurants can’t adopt and adapt to market conditions, then they should go out of business. Let markets determine what consumers want, and the natural fluid conditions will make the correct adjustments.

Crocs, the company and product name for those brightly colored rubber clogs that Mario Batali and others wear, recently made a decision to close their manufacturing facility in Quebec, Canada. The factory there employed 669

people, and the company cited high labor costs and a slowdown in sales for their plant closure.

While I am sure the fashion world is rejoicing in the slowdown in sales of the mostly hideous footwear, what caught our eye was the quote from Raymond Bachand, the Quebecois minister of economic development, innovations and

exports: “This is a pure case of savage capitalism. They decided to flush away Quebec.”

Now I have no idea what savage capitalism is, but if our dear French-Canadian friend defines it as moving production to a lower labor cost venue, then I am all for it. The key to capitalism is three-fold:

• Easy entry and exit from a market
• Free flow of information
• Asset holders make independent economic decisions

Quebec may not be happy about losing the 669 jobs, but it should be more unhappy about creating a business environment where quality work can be done cheaper elsewhere.