Several days ago, floundering movie-rental giant Blockbuster agreed to sell itself to debt-holders for $290 million, even though the economy is fine. Actually, it’s doing wonderfully.
A little background: Blockbuster has been in some deep trouble lately, filing for bankruptcy protection Sept. 23 and being delisted from the New York Stock Exchange around the same time. Several factors led to its demise, but undoubtedly, Netflix and Redbox had plenty to do with it.
On the spiral down, Blockbuster has sold itself to Cobalt Video Holdco LLC for $290 million in a stalking horse bid.
Stalking horse bids work like this: Blockbuster gets an initial bid from a company (Cobalt LLC), and this initial offer ensures that auctioning for the company, when it begins, can’t be too low.
The term derives from an old hunting analogy. Hunters, being so clever as they often are, discovered a unique strategy for sneaking up on birds.
Rather unsurprisingly, if the hunter sneaks up on the bird, it will fly away, but if he walks behind a horse or cow, where his upper body is obscured, he can get quite close to the prey before firing.
The concept plays out in business and politics all the time, and Blockbuster is trying to make sure it receives a fair price for its assets when auctioning begins.
Many consider this a proverbial sign of the times — an iconic representation of the last few years.
The 2008 recession, which was admittedly tough, has been done for nearly two years now.
The National Bureau of Economic Research says the global recession began in December 2007 and ended in June 2009.
Not only is the recession done, it’s been done for quite some time.
But this issue reflects a larger misunderstanding about economics from the public. When politicians come up for re-election or a policy is debated, everyone becomes an armchair economist.
To be quite clear, economics is not a “hard science.” It’s not like math. Economies don’t always behave the way we expect them to, sometimes stubbornly doing just the opposite of what we intended or forecasted.
There’s a massive amount of debate and controversy involved in the field, so even for “experts,” it’s pretty tough to make clear, generalized calls.
So, when someone tells you “every economist says” or “every economist thinks,” you have my permission to stop listening. As a matter of fact, it’s your responsibility to do so.
So divided and complicated is the field of economics that its been dubbed the “abysmal science.” Harry Truman, our 44th president, famously stated he wanted a “one-armed economist.” He thought economists too often stated, “On the one hand … on the other …”
In fact, many businesses are thriving despite the turmoil. HoldCube, a Louisiana based company working in advertising and marketing, for example, has grown from a 2006 revenue of $120,000 to $3.2 million in 2010. That’s a three-year growth of around 2,567 percent, according to Inc.com — and right through the recession.
So when Blockbuster goes out of business, don’t complain about the economy. Just go to Redbox.
 
Devin Graham is a 21-year-old business management senior from Prairieville. Follow him on
Twitter @TDR_dgraham.
 
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Contact Devin Graham at
[email protected]