Home Depot A customer loads 2x4 lumber onto a cart inside a Home Depot store in Livermore, California, United States, on Thursday, May 12, 2022. (Bloomberg Opinion — In 1974, Ken Langone formed a venture capital firm, Invemed, and began looking for opportunities.As the name of the company suggests, he initially focused on health care, but he couldn't shake the idea that there were great opportunities in home improvement.Everyone liked to improve their homes, and Langone himself, who had grown up poor, but the home improvement industry was archaic and fragmented: lots of mom-and-pop stores with high prices and limited inventory.Why not create well-organized superstores that offer everything you need at low prices every day?Langone spent months fruitlessly searching for people who shared his vision before forming relationships with Arthur Blank and Bernard Marcus.They meticulously planned their operations, coming up with the name Home Depot for their new company.In 1979, the three of them opened their first two stores in Atlanta—55,000-75,000-square-foot, high-ceilinged stores—and waited for customers to arrive.Two years later they went public.Home Depot Inc. (HD) proved to be one of the great business success stories of the day, transforming the home improvement industry and making the three founders billionaires.Langone is one of New York City's great philanthropists, having donated more than $200 million to the New York University School of Medicine.But, as he underlines in his effervescent autobiography "I Love Capitalism!"(I love capitalism!), is just as proud that Home Depot made millionaires of its first 3,000 employees, from parking lot cart pickers and up, and that it now provides 400,000 people with jobs. solids.The parallels between the 2020s and the 1970s are becoming more and more numerous.The economy faces the threat of stagflation.Fuel prices are skyrocketing and a shortage is looming.Politicians falter.The international environment is deteriorating.The US Supreme Court is reviewing the ruling Roe v.Wade of 1973. The murder rate skyrockets amid a general sense of social decomposition.On a recent trip to New York City, I was struck by the sorry state of midtown Manhattan, as many ordinary citizens leave the streets, especially at night, to make way for the homeless and people with disabilities. mental diseases.How long will it be before Joe Biden addresses the country about the national unrest, or before a streaming platform decides to do a remake of Charles Bronson's “Death Wish”?The obvious response to the prospect of a 1970s reprise is to withdraw from the world.If you can work from home, leave the big city for the suburbs, the ex-urbs or, better yet, the countryside;if you have enough savings, retire early.Throw away the television and instead, cultivate your garden.“This is an hour in history that boggles our minds and hurts our hearts,” President Gerald Ford said when he took office in 1974, when the 1970s were really starting to bite.“I have begun to think that the seventies are the worst years since the history of life on earth began,” added Joseph Alsop that same year.Probably the last thing we want is to relive that."But a closer look at the 1970s also suggests a more optimistic story to tell.For all the Schumpeterian destruction, there was also a lot of creation;And beyond all the nonsense, there was plenty of common sense: a group of forward-thinking intellectuals and politicians developed solutions to the world's ills that have renewed relevance today.The 1970s were a period of extraordinary entrepreneurial vigor: While traditional companies struggled to survive, young visionaries not only invented new companies but created industries that transformed the world, most notably the personal computer and biotechnology.The list of startups from this supposedly bleak decade is impressive: Southwest Airlines Co. (LUV), Federal Express Corp. (FDX), Nike Inc. (NKE), Genentech Inc., SAS Institute, Oracle Corp. (ORCL), Visa Inc (V)., Ben & Jerry's HomeMade Inc., Charles Schwab Corp. (SCHW), Price Club, Microsoft Corp (MSFT), Apple Inc.(AAPL), and of course Home Depot.Silicon Valley's two leading venture capital firms, Sequoia Capital and Kleiner Perkins Caufield & Byers, were created in 1972.If nothing else, this shows that good business ideas will continue to flourish even when the prevailing economic winds are against them.Technological innovation continued despite rising inflation and stagnant growth.Intel's development of the 8080 microprocessor in the early 1970s, under the leadership of Gordon Moore and Robert Noyce, provided the guts of the personal computer.So oddballs and hobbyists competed feverishly to produce a viable PC, regardless of what transpired in the stock market or in Iran.Steve Jobs and Steve Wozniak sold less than 200 units of the Apple 1, released in 1976. When Apple went public on December 12, 1980, at $22 a share, it reached a market capitalization of $1.8 billion and created 300 millionaires.Bill Gates and Paul Allen spent the late 1970s tinkering with the early Altair 8800 PC and writing a BASIC program for it, before a deal with International Business Machines Corp. (IBM) in 1980 made their fortune.Timeless business truths like economies of scale and improved logistics continued to pay off.Fred Smith stubbornly pursued his idea of ​​delivering packages through a super center, despite the “C” his Yale professor gave him for the paper in which he first floated the idea, rising fuel prices and of the $29 million in losses his company, FedEx, racked up in its first two years.Dee Ward Hock quickly captured 20% of the US credit card market by merging independent banks, becoming the largest supplier of "plastic" in the US. Price Club used the same technique as Home Depot to apply economies of scale to a fragmented market.The business successes of the 1970s may also demonstrate something even more fundamental: that tough times can be positively good for business innovation, as talented people break free from old institutions, ordinary people are forced to seek bargains and the entertainment market skyrockets.The Great Depression saw the birth of an unusual number of corporate icons: Morgan Stanley (MS), Texas Instruments Inc. (TXN), Krispy Kreme Inc. (DNUT), Knoll Inc., United Technologies Corporation, Polaroid Holdings Corp. and, providing glamor and Escapism in a Gloomy Decade, Revlon Inc. (REV) and Walt Disney Co. (DIS).The Nevada legislature legalized gambling in 1931, in part because the divorce market had collapsed, as couples decided to stick together during hard times.Hewlett-Packard Enterprise Co. (HPE) was founded during the "depression within the depression" of 1939, Hyatt Hotels Co. (H) during the 1958 recession, and Google during the 1998 dot-com crash.The 1970s also saw public intellectuals develop powerful solutions to the problems of the day, solutions that ended up being forged into neoliberalism, neoconservatism, and various combinations of the two.The American Enterprise Institute and the Brookings Institution, in collaboration, championed deregulation, starting with the airline industry.Michael Jensen and William Meckling laid out the solution to the managerial self-indulgence problem in "Theory of the Firm" (1976), with their view of an active market in corporate control.Milton Friedman suggested a solution to the problem of inflation in the form of monetarism.Periodicals like The Public Interest and Commentary spent the 1970s pointing to the ways in which "the noisy misrule of chaos," to borrow Milton's phrase, spawned by progressive police and law-and-order policies, was destroying America. the cities of the United States (although it was not until 1982 that James Q. Wilson and George Kelling introduced their “broken windows theory”).It will not be enough to simply reapply these solutions to the problems of the 2020s: The neoliberal revolution of the last few decades has produced new problems of its own, notably rising inequality and growing corporate concentration, that require new solutions.However, we can take comfort in two things, as the comparisons with the 70s are more and more striking.The first is that we have faced problems as serious as the current ones and have overcome them, thanks to a mixture of intellectual audacity and determination.The second is that entrepreneurship can flourish no matter how hostile the terrain and how inclement the weather.This note does not necessarily reflect the opinion of the editorial board or of Bloomberg LP and its owners.This article was translated by Estefanía Salinas Concha.© Copyright, Bloomberg Line |Falic Media© Copyright, Bloomberg Line |Falic Media