Strong Opinions @marksbirch

Random thoughts from a NYC entrepreneur and investor about start-ups, technology and the people that make it all happen. Also find time for good tunes and good food.
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I had an interesting exchange over Twitter earlier today about the US Post Office.  None of it was particularly supportive, including some exasperation about the recent scaremongering ads.

The blunt fact though is that the USPS is in dire straits.  From an article about the USPS’s recent struggles in the New York Times a few months back, here are some rather depressing statistics about the state of affairs:

  • Labor represents 80 percent of the agency’s expenses, compared with 53 percent at United Parcel Service and 32 percent at FedEx, its two biggest private competitors.
  • The system will handle an estimated 167 billion pieces of mail this fiscal year, down 22 percent from five years ago…pessimistic projections suggest that volume could plunge to 118 billion pieces by 2020. The law also prevents the post office from raising postage fees faster than inflation.
  • Postal service officials say one reason for their high costs is that they are legally required to provide universal service, making deliveries to 150 million addresses nationwide each week.
  • They add that a major factor for the post office’s $20 billion in losses over the past four years is a 2006 law requiring the postal service to pay an average of $5.5 billion annually for 10 years to finance retiree health costs for the next 75 years.
  • In some countries, post offices double as banks or sell insurance or cellphones. In the United States, the postal service is barred from entering many areas.

So the Post Office cannot cut costs (which is 80% labor and protected by unions), but also is hamstrung by the inability to raise revenue in a way that a Deutsche Post or Royal Mail in Europe can.  Oh, and the staple of their business is being wiped out by technology.

A lot of friends in the technology space say off with its head and eliminate the USPS.  Sounds like it would be a good idea on the surface and a massive cost sayings to taxpayers that float the organization.  I have even declared the USPS dead by 2020.  Before we decide that we can just do away with the USPS however, we need to think about the ramifications of that decision.  Do we really want to force it into insolvency or institute major cuts, right in the middle of a global economic meltdown?  What do we do with the extra 100,000 or 200,000 people that would be out of work? Do you really think they have “transferable skills” or the moxie to simple become entrepreneurs and start businesses?  Not likely is my response to all of that.

However, we are still left with an incredibly broken infrastructure.  One the one hand is the government, which cannot get out of its own way to make a decision on getting the USPS the freedom to fix the situation.  On the other hand, the USPS is not the epitome of innovation and needs to find other revenue streams as junk mail and catalogs and routes in the middle of Kentucky are not going to pay the bills.  Technology is upending the business in letters just like Fred Wilson mentioned in an earlier post.

What is the solution though?  Suppose the government was not in the way, what would you propose?  I am really interested to hear what some of your innovative ideas might be, or do you think the USPS is a dinosaur in the twilight of extinction? 

  1. marksbirch posted this