Strange Days

It's embarrassing actually.  Sophisticated grown men and women with six, seven eight figures and more to invest running in wholesale panic.  The Dow almost 1000 points down one day up 700 the next, back and forth, completely improbable swings.

Then there's Bernanke..."broader economic recovery will not happen right away."  There's an encouraging word.  At least Greenspan understood that economics was a behavioral science and knew how to spread oil on the water to calm the markets down.

There's an old saying, "When your neighbor's out of work, it's a recession.  When you're out of work, it's a depression."

What is it when your business is growing like gangbusters while the pundits wring their hands and gnash their teeth about how awful it all is?  There are companies out there doing that as we speak.  Back in the '92 recession, which was tough for many companies, I had two clients that were growing like crazy.  One was on a 100% annual pace and the other a 200% a year pace.

Granted, when things are as ridiculous as they are at the moment, it's hard to get people to make decisions.  But human needs don't change, human aspirations don't change.  During the great depression the movie moguls made huge fortunes.  

I hope one lesson comes out of all this madness: deregulation is a bad idea.  Ok, I know this is tantamount to worshiping the antichrist to conservatives, but look back at the savings and loan crisis.  Now the banking crisis.  How many billions (trillions?) of debt do we have to burden our children with before we figure out that business cannot be trusted to police itself?  As a former client of mine used to say, "Lead us not into temptation, for we will fail."  

By the way, whatever happened to fiscal responsibility?  Reagan left a huge deficit.  Bush has doubled the national debt.  Incomprehensible numbers.  

We complain about energy costs, since we import most of our oil, the cost is a function of the value of the dollar isn't it?  Historic lows for the dollar and historic highs for energy.  Suppose there is a correlation?  Would you loan money to a friend who is clearly spending more than he earns?  Why would anyone want to loan money to us.  Our fiscal policy is not remotely sustainable.  But, our presidents are only in office for up to eight years, so it will wind up being someone else's problem.  

After decades of republicans bashing democrats for being "tax and spend liberals", how ironic is it that the only people in Congress who seem to have any concern about fiscal responsibility these days are the so-called blue dog democrats?   

I understand all the Friedman economics behind the idea of deregulation but as the old song says, "freedom's just another word for nothing left to lose."  Unlimited freedom is a utopian idea which does not work.  Limits are intrinsic to life.  If it weren't for limits, what possible use would we have for creativity?

If we want to deregulate an industry, how about we charge them a tax which is kept in a pool to bail them out when they fail (as if politicians could ever keep their hands off such a pool).  Autos, airlines, banks, S&Ls, telecoms.  You name it.  Deregulation breeds big companies, who inevitably create big influence with big politicians.  This is the result of Friedman economics.  I'm not a fan of big government but I'm also not a fan of being forced to bail out a bunch of irresponsible insurance, brokerage and banking executives to the tune of almost a trillion dollars while the rich get richer and the middle class shrinks.  

It's not an issue for me personally, because I've always made a decent and comfortable living and I'm very confident of being able to continue to do so.  But people are living at the margin in unprecedented numbers, at least in our lifetime.  How come?

Part is the pressure of the baby boom generation which had blown up every system it's hit from education, to real estate, and now to healthcare.  Part of it is we've become a knowledge economy and we haven't effectively built companies that effectively leverage our people.  Which translates into the fact that we haven't created the productivity gains from knowledge workers that we got from factory workers after World War II which gave rise to the middle class our parents largely enjoyed.  

It's time to get past the religious fervor of conservative doctrine.  Ism's don't work.  We have to mature as a people to take what works from wherever we find it.  Balance freedom with responsibility and accountability to society.  That is what we pay government for: to make sure that members of society play by the rules and to make sure there are rules to play by.  If that means business people need to work a bit harder to exercise their creativity on how to prosper within the constraints of regulation, so be it.  It won't kill them or us.  Chaos in the markets can devastate a lifetime's worth of work and effort.

My father graduated from Cal Tech in 1932.  He was one of two graduates to get a job when he left school.  Unthinkable today.  The depression marked him for his whole life, even though he was very successful by most standards.  We do not need another great depression.

What to do?  Chin up.  Good attitude.  Spread the word.  Vote for some sanity.  Find opportunities for your business, learn to leverage your people (they have more creativity and talent than you have any idea).  Sanity begins at home, with your family and your colleagues at work.  It's a brave new world.  We just need to get creative and we can all figure out how to prosper in it.