Leadership & Business

I Write About Reality--And I Want to Share It!

One of the burdens you accept when you decide to begin writing about what’s on your mind is criticism.  That’s because it’s all but a statistical certainty that 100% of the population—and even 100% of your readers—won’t agree with everything you write.

I’ve also been asked lately why I write about things like economics and politics, while my company’s focus is performance excellence. The reason there is simple, but even simple answers can have more than one part to them.  The first part of the answer is that I don’t see politics and economics all that differently than business and what I write about are my conclusions based on DATA driven analysis.  The second part of the answer is even simpler than that; these topics interest me.  I spend a lot of time studying them and figure my investment in time and analysis isn’t really worth much if I don’t share it.  In fact, to quote a friend who recently published a terrific book, “It’s not reality unless it’s shared.” I write about reality—and I want to share it.

To recap some of what I’ve written about in the past.

January 2nd, 2008: I said the recession had started. In June the economists were still talking about how we had skirted one.  November 26th, 2008:  I said the depression had started.  The economists are still denying it, but just yesterday, Paul Volker, Chairman of the President’s Council of Economic Advisors did call it a GREAT Recession (they’re “easing” us into it).  On December 10th, I wrote of the need to let at least one of the big three automakers go bankrupt.  How much money will have been wasted delaying that inevitable conclusion?  The point is that the data leading to all of these conclusions is fairly straight forward—and if we’d listen to the data, instead of emotions and politicians, we might actually solve problems a little faster.  So I will continue to write about a range of topics broader than the day to day focus, because as President Obama just demonstrated by appointing both a Chief Performance Officer and a Chief Technology Officer to focus on technology innovation, the principles that we espouse here at BMGI apply to just about anything—and everything.

A Secretary of Innovation? Great Idea!

In a recent article, Thomas D. Kuczmarskiwrites that he thinks President Obama could use a Secretary of Innovation.  I agree with him.

Kuczmarski writes that our current approach to stimulus is not likely to get the job done.  Again, I agree with him.

It strikes me that there is still a fundamental misunderstanding on the part of most people, including economists.  And that is that the global economy is not slowing down.  It has essentially stalled.  And the attempts at recovery are kind of like pulling the cord on a lawn mower.  You can pull, and pull, and pull, but if you’re not pulling really hard and fast at least once, all you do is use up your energy without the engine starting.  Well, all the relief and stimulus programs around the world—from China to Germany to the US—are basically just like using up energy, only instead we’re using up money.  That’s because it appears that no one has the courage to “jolt” the engine of the economy back into a growth mode.  We’re going to pour money into this problem for years before we see real growth again.  The lost decade is becoming a more likely scenario every day.  It’s very sad—and very frightening. 

Stimulus, Schmimulus

There’s only about one silver lining to the coming stimulus plans of our new government: TIMING.  That is to say, it’s going to take quite some time for any real money to hit the economy.  First, Congress has to pass a bill.  Then, specific projects, if not identified in the bill, need to be chosen. Some already exist on the drawing board, but still, plans need to be laid, bridges designed, contractors given the opportunity to bid.  Contracts need to be awarded and new people hired. It will take many, many months before any real money hits the market—and that’s a good thing—because maybe it will give us a chance to hit the bottom before it does.  Of course, by then it will be too late to stop the spending and will more likely help fuel inflation, but we can fight that battle when we get there.  What we really have to hope for is fast enough contraction that we get back to a supply and demand balance before the money hits; otherwise, we’ll be dragging out the depression even longer.  The good news—that’s exactly what’s happening.  For the first time in months I’m becoming cautiously optimistic.

Think about the last stimulus package:  $160B.  For what?  To keep the retailers alive for another month?  That’s what it amounts to.  Had we not spent the $160B, our national deficit would be about $150B lower (remember, some taxes were generated), and the retailers we propped up would have realized a month earlier how bad things were going to get.  They’d have started laying people off a month earlier. And we’d be a month closer to the end.  That may sound cold, but it’s the truth.

Right now what companies need to focus on—as I said the other day—is the reality that none of us can really predict the timing of anything with any great accuracy these days.  So while I am becoming cautiously optimistic that I see some precursors to a bottom, the responsible thing to do is to continue to assume the worst.  Our economy is, if nothing else, extremely fragile right now. Where the end lies cannot be predicted because we cannot predict the behavior of others—whether we’re talking about governments or terrorists. While there are signs that we may soon reach a supply and demand equilibrium, there are still many things that can tip us over yet another cliff.

One thing I would like to encourage you to do is to start thinking about the things that you can be doing differently without spending money.  There’s a certain “paralysis” that has persisted for the past few months as companies grappled with reality setting in and made downsizing plans.  Now that the bulk of the downsizing is done, the paralysis is lifting.  Now is the time that tough times can be turned to our advantage.  These are the times when new ideas start take hold, like the shop in Dubai that’s serving $1 cups of coffee, taking tremendous market share away from Starbucks.  There are new risk sharing and partnering models that are popping up in B2B businesses.

Once an industry hits its bottom, it’s remarkable how quickly things can get back to normal.  Who would have thought, for example, that the airlines would be achieving stability during such times.  Only a year ago it looked like the entire industry could go bust, but they downsized and restructured.  Many thought their efforts would be in vain, only to be crushed by a contracting economy, but that’s turning out not to be the case. They downsized—cutting not only heads but also flights—to achieve a supply and demand balance.  The flights I take today are more full than ever.

So take note:  we can’t predict the turn, but it will come, and surprisingly fast.  The time to capitalize on unusual opportunity is now.

A Depression It Is!!

While I find it somewhat challenging to make the time to write a blog on a regular basis, I'm going to give it another shot because I've received so many requests.  I'm also going to expand on the subject of this blog and will not restrict it to performance excellenceand innovation--the focus of my company--but instead will share with you what I believe is going on in business and beyond, along with what we might do about it.

 

Today I shared with the people in my company a conclusion that I've been coming to for some time.  This recession--while perhaps only called that over the next few years--will be recast by history as a Depression.  That conclusion may not come for 10, 15, or 20 years, but I am quite sure that Depression is the term that will be used by historians.  Tomorrow I will start to explain why.  I will also explain why some companies--seemingly weak ones--may survive and why others, even though they appear stronger--may not.  And I will share with you the things I think any company that wants to make it through the next 24 months needs to do.  Until tomorrow . . .