2009: A Good Time for a Fresh Perspective
Posted on January 26, 2009
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As the tumultuous 2008 has come to a close (finally!) and after hundreds of thousands of words have been written (well, who knows how many, really?), most of them commenting on the events that drove us into the longest depression in quite a while, it might be time to gain a little perspective and, hopefully, some altitude of spirits as well.
Even though it may seem as if the events unfolding first in the financial markets and then in the global economy are quite unprecedented, the truth of it is that they are not. It only seems as if such a spectacularly plummeting economic cycle is happening for the first time, because most of those analyzing it have not been around long enough. The collective memory of most, me included, does not reach back far enough and the only reference point most of us have has been generated by massive upward swings that created a fundamentally faulty belief that risk only has an upside.
Also, it is not as if financial markets were free from greed and fraud. I’m sure many have heard of the tulip bulb mania of the 17th century, or of Charles Ponzi more recently, who even gave his last name to a particular brand of manipulative practices in the 1920s, or of the Hunt brothers who tried to corner the silver market in the 1980s, or of the Enron and WorldCom debacles pounding the tech bubble into the ground in 2001.
It is simply human condition to enjoy the good times, to become completely complacent, to get greedy eventually and throw all caution right out the window. So, of course, we are completely unprepared when markets turn sour and, of course, we panic, thinking — but not saying it out loud — how all this greed and self-dealing is bound to bring on an economic Armageddon.
There has been much talk about certain industries struggling more than others because of the current economic woes. But the problems of the North American auto industry, for example, are neither new nor completely caused by the current economic environment. Basically, since the 1970s, the auto industry has been in trouble because it ignored warnings that cars made by North American automakers are not the cars that consumers would want long-term and because it ignored foreigners grabbing more and more market share by making cars that people did want.
Finally, these days, information flows from one point to another within mere seconds. But, just as the content of that information is near-instant, so is its scope. For example, lately, all we’ve read about is how the real estate market has underappreciated in 2008. But what most people seem to forget is that these “lost” property values have really been created only in the past five years or so, and during a real estate bubble. What is depreciating right now is not the real value, but inflated value. As usual, it is all about acquiring perspective.
The way I choose to look at the world right now is that, true, we have been brought to our knees in a very few short months. But the thing about hitting the bottom is that there is usually no other path than the one taking us up. The world and the global economy will always go through cycles, upward and downward. Additionally, unlike previous down cycles, there are still reasons to look at the glass as half full rather than half empty.
For starters, although unemployment has increased, it is still below 10%, which means that at least 90% of employable workers still have their jobs. Sure, some industries have taken a beating. But such a beating can also be used as an incentive to restructure, reorganize and rejuvenate ailing and dysfunctional business models and structures.
No one is saying that wishful thinking is sufficient to make good things come. But positive thinking is an essential component of positive change. And, as 2008 has dealt us most of the cards already, we have to find a way to continue playing with a hand dealt.
In the coming weeks and months, I will focus in my column on the road ahead, rather than on dissecting events already behind us. True, perspective is best gained when putting current events in a historical context. But perspective, while valuable, is not a compass in and of itself pointing to the true north. Plenty of introspective and forward thinking will have to come in to play as well if we truly wish to survive this crisis.
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