Recession

Interesting post, Max. I'm no economic expert, but here's my thoughts.

1. The indicators are all down

Kinda. Many of the key economic indicators are down but the market is already back in bull territory. It seems to me that the economy is changing rather than simply going downward. For example, the fastest growing segment of the small business market is home-based business. In many instances, the creation of home businesses creates problems in the rest of the business world - fewer office spaces rented, less land bought, fewer employees hired, even less of a need for daycare - but the model can be far more efficient.

2. There is a fundamental shift in psychology -- some of it is related to 9/11 and covers fear...fear is the number one enemy of an economy. also...I read a poll recently from a womens' magazine that said 70% of working women now wish to stay home and stop working...this is not 9/11 related, as the poll was done pre-9/11. It wouldn't surprise me to learn that number has grown since 9/11, though. I have seen this poll more than once in various publications. One other similar poll has it around 62%...the point is, these are pieces of productivity that might not be there forever.

Totally agreed. There is a massive psychological shift underway in America and it will significantly impact business. Personally, I think the fundamental shift we are seeing isn't just positive, but a necessary part of growth both personally and financially for America.

Years ago, no one controlled their own finances or had stocks or 401K's. They relied on their company to provide for them and Social Security to augment that. When companies began to fail their employees, that trust was gone and people began to take their financial futures in their own hands.

When you look at the best-selling books over the past 10 years, the vast majority are self-improvement and self-motivation, either emotionally/psychologically or physically or financially. People are looking at themselves and their society more differently than they ever have.

The poll you mentioned is very interesting but not too surprising. I have seen similar polls but they seem to indicate that everyone wants to stay home, not just women. People are, increasingly, embracing the concept of simplicity in their lives and getting away from the need for material possessions. As a result, the world of business has to change.

Hell, you even see it in commercials. They don't push you to buy because of "luxury" or "asthetic". Ads are now based on safety and need. Just look at car ad's - they are dominated by how safe the vehicle is or how the act of buying with improve the economy. Nothing about how cool it looks or how fast it is any longer.

3. Unemployment -- we keep taking hit after hit locally, it seems. When people don't have jobs, particularly at this time of year, they don't spend near as much as they would otherwise. This trickles through the economy during a season where some merchants typically make more than half of their revenues for the entire year. The fall of the nation's 7th largest business (in terms of revenues) doesn't help either...can you imagine the number of vendors that are affected by that here locally and elsewhere? I recognize that's just one company...but they're not the only company struggling, either.

I agree that the fall of Enron is significant but Houston has one of the most diverse job markets in America due, primarily, to the lessons learned during the oil bust. Houston has more new job start ups each year (for the past 3) than any city in America. In addition, the Economist predicted steady economic growth for Houston for the next 30 years and, when asked about the effects of 9/11 and job losses in the energy industry, the Economist said they didn't feel the need to modify their predictions because of Houston's widely diverse job market.

I think that it will be far worse for places who rely on one company or industry. Charlotte is struggling because American Airlines is their big company in town. Oklahoma is concerned because it will likely lose Phillips when it combines with Conoco and moves to Houston (by the way, something that will help Houston a lot).

The lesson is that, if you are relying heavily on one business or industry, watch out because you are asking for it.

4. Terrorism -- just one more incident and you'll have some lost industries. particularly travel/tourism. can you imagine what one more of these incidents (even on a smaller scale) would do to air travel?? how many times can the govt bail that industry out?? it has an adverse affect from airlines right down to the restaurants where tourists typically would dine. ask the folks of NYC how tourism is during the Christmas season right now...a season that usually flocks the town with tourists. now i certainly hope there are no more incidents...but i'm not encouraged.

Americans are resilient but I agree. I do believe that another incident spaced widely enough apart from 9/11 would probably not create a cumilitive effect. There have been studies that show 18 months is usually enough of a cushion between significant life-altering events for people to handle them without the effects being cumulitive.

Nevertheless, I agree that another significant terrorist event within the next few months could be devastating.

5. I'm an attorney...we do workouts and deal with financial fraud a good deal. our business goes great during these downtimes. we're very busy right now! the indications that i get from what i see are that the economy is not on the way back up anytime soon. I wish it were...

I'm not an optimist, generally, but, if there is one thing I am optimistic about, it is the way people respond to economic problems. When things go bad financially or physically for a group of people, it has a tendency to mobilize them. Epidemics of any kind produce often startling results. Necessity is, after all, the mother of invention.

I don't think we are going to be booming soon, but I do think that we'll see the bleeding stop sooner than you think. What will be important is how the country responds to the many changes effecting society today. We have undergone MASSIVE changes in just the past 5 or 6 years with the increase in mass communications. We wouldn't have even HAD this conversation 6 years ago because we didn't have an online forum like this.

We, as a world, are changing VERY fast and that brings tremendous upheaval and difficulty. How we handle those changes will effect the lives of people on this planet for the next 500 years, which is why proceeding carefully is so important for everyone.

Good thread!

 

Yeah, I think you are right. I am normally a pretty pessimistic person with stuff like this, but I'm strangely optimistic. I guess I just feel like the world is, in many ways, changing for the better and in order to grow, we need these growing pains. I guess that just makes me feel a little better about it.

I would probably be more worried if I thought that the vast majority of industries were struggling which they aren't. You even said that your business is booming.