BLOGNAME: LOUDER THAN WORDSAn informal, stream-of-consciousness reflection on business ideas, events and issues in modern business, modern life and with some specifics to the web-software industry by Paul Tomori, Internet Entrepreneur
|RECESSION IS OVER (if you want it)|
By Paul Tomori
Tuesday, December 02, 2008 at 17:22:34 (EST)
"One of the lessons from the Depression is that things can smolder for a long time. What I'm worried about right now is that our confidence has been hurt, and that's difficult to restore. No matter what we do, we're trying to deal with a psychological phenomenon. So the Fed can cut interest rates and purchase asset-backed securities, but that only works in really restoring full prosperity if people believe that we're back again. That's a little hard to manage.
In December of 1971, John Lennon released his opposition to the Vietnam war singing... WAR IS OVER (if you want it). I believe what he was trying to say was, it all starts with the internal will and perception of what is possible. Was the world caught up in a quagmire of disastrous political foreign policy and was the situation hopeless? Only if they 'viewed' it as hopeless. Their viewpoint drove their fear. Their fear kept them at war.
Bill Gross - Founder of Bond Giant: Pimco"
These days, the power of perception is as strong as ever. With reams of instant information available at our fingertips by internet, blackberry, tv, radio and newspaper, one can almost feel the waves of public emotions change with each pronouncement in the headlines. The media strums the chords of a million heartstrings and we all seem to sway in blind rhythm.
Ok, that is sounding a bit obtuse perhaps. Some illustrations:
The media says "banks are tightening up". The intended perception is that vaults are closing and access to capital is reduced. But do banks really tighten up? Not really. By using the word 'banks', there is a disembodiment to the concept. In reality, it's just people in management at the banks setting internal policies to restrict the flow of loans. They are trying to safeguard their funds. They are fearful. Perception becomes reality.
The media refers to "public sentiment driving the markets down". Let's get real. There is no such thing as a 'public having a sentiment'. Only individual people can have a sentiment. Individual people perceive problems that they believe aren't going to get better and individual people make decisions to sell stock. If it turns out that there are more scared individual people than hopeful people, then market prices trend downward. Perception becomes reality.
Strangely, today, the US Government announced that America has been in a recession since December 2007. Hmmm... this is where the manipulation of perception can really reflect human folly. Perhaps, if we learned to admit the obvious, then we could take the necessary steps to alter the course. Note: denial of reality is generally not a useful approach to take when handling perception. Instead, for the last 12 months, through a failure to even admit how serious the problem was, the problem got worse. People's perception that the government itself was in denial didn't help matters.
Admittedly, it takes more than wanting a problem to go away. And most definitely, it takes more than band-aids on knife wounds. This notion of throwing billions of dollars at failing car manufacturers seems to defy all principles of what made the free world as powerful as it is. With freedom, one is empowered to rise to one's potential or crumble on one's weaknesses. It is a great responsibility... but it is a great opportunity. So, on what principle would a government bail out a failed business plan? Do they think the failed business plan will succeed (with a 25 billion dollar bandaid) if they want it? Do they think that by portraying themselves as a kind of "big daddy" coming to the rescue is going to sway public sentiment into thinking everything is ok and that these big bloated companies just need a little financial bridge? Well, I am an individual in the public and my sentiment remains unmoved.
The decision-making people behind the big companies who have made inferior cars for years may get a temporary financial boost, but the effects will be temporary if they don't really WANT to change. By all perceptions, the big car companies want the status quo of their glory years, without recognizing new public, environmental and economic realities. And, we all know that doing more of what doesn't work... doesn't work.
On principle alone, a governmental injection of cash is a poor idea. However, the short-term appeal might just overrule the long-term necessities. Why suffer a pain today that can be deferred til tomorrow? Answer: because, a stitch in time saves nine.
The recession can be over if you want it, but not through pseudo-fixes and not through denial of what is really happening. Sometimes you have to stop decorating the house and spend some time fixing the foundation you never see. Tighten the belt, trim the fat, make a plan... then slowly and steadily... return to true prosperity... if you want it.
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