Rewarding phony profits...

So we rewarded phony profits and gave bonuses to phony growth.

I think I've got a rough handle on what happened with the financial crisis. Little by little, Charlie Rose show followed by CNBC's Squawk box, followed by Paul Krugman interview followed by Warren Buffett interview -- more information about finance than I'd ever have believed I could sit through.

There are eerie echoes to the dot-com bubble, when every CEO was a genius and on the cover of a magazine. This time, it was every financier was a genius of George Soros capability.

But...I didn't really need all this reasoning, which has slowly trickled out as the disaster unfolds. All I originally saw was the sheer number of houses and the rising values.

All I really had to do, is look at the curve. That steep steep curve upward ain't natural, never was natural and never will be natural -- whether it's houses or pogs.

It's also seems to always come out that if it looks too good to be true, watch out.

I would say this applies to small business just as much as large business.

Profits in most Mom and Pops are going to be modest -- hell, I don't think most can even afford not to work the majority of hours, much less hire a manager and three employees.

When I was growing up, the owner of the downtown department store -- say Wetles -- could be one of the more wealthy individuals in town. The owners of each of the drug stores, the hardware store, the furniture store -- solid citizens, all.

Now? I think that middle class type store is disappearing from the landscape, leaving the big box stores and the little specialty shops. This is a much more competitive market -- and if it has been based on 'phony' local profits, we have yet to really pay the price in full.

Most Mom and Pops won't produce enough profits to buy you an SUV and a huge house in the West Hills and a lavish wardrobe.

I can't tell you the number of times I've seen competitors spend on product and infrastructure that had my customers questioning my abilities: "Why aren't you doing such and such? Why don't you do what so and so is doing?"

And I'd just have to shake my head and say, "I don't know HOW so and so is doing that. I don't know HOW he can do such and such..."

Which sounds lame. And the danger is that you get sucked in trying to keep up with the competitor. If you compete with morons, that make you a moron.

I mean, most businesses probably do earn a bit more profit than me -- just because of the nature of my business. But then again, I seem to still be in business year after year while they come and go. So...I'm not sure.

But I do believe the world of small business is trending back to my way of thinking.