This starts out sounding like doom and gloom. It isn’t. I have come to the realization that the world of small business ownership is changing, and we have to change with it. For the next few weeks this column will discuss how we have to be different. Please read through the depressing part- it gets better. I promise.
On July 15, 1979 President Jimmy Carter delivered a nationally televised speech on the “crisis of confidence” facing the American people. It has become widely known as his “malaise” speech. although that word never appeared in it.
The country had good reason to feel depressed about things. The economy had just started growing after the deep recession of 1974-1975, but the energy crisis engendered stagflation. Inflation was at double digit levels, Congress was gridlocked, and the Fed’s loose money policies were failing to prop up the markets. By May of 1980 we had fallen back into recession, which spelled the end for Carter’s presidency.
The parallels to 2011 are obvious. Consumer confidence hovers in the low 20-percent range. Inflation, if measured using 1980 standards, is nearing 10%. Quantitative Easing 1.0, 1.5 and 2.0 have failed to revive the markets, whose volatility is terrifying small investors.
Instead of the Iran hostage crisis and the Russian invasion of Afghanistan, we have Iraq and our invasion of Afghanistan. (Again? There is a reason it is called the “Graveyard of Empires.”) China is positioned to pass us as the largest economy in the world. Over 15% of the nation is unemployed or underemployed. The residential housing market is years away from recovery. Europe is threatened with financial meltdown. Half the country is becoming a dust bowl, while the other half is swimming to work. We have become gun-shy of the news- it seems to be all bad, and promises us every day that things will get worse.
The response of small business owners is consistent and universal. “All that may be true, but at the end of the day I just have to keep running my company the best way I know how.”
A valid argument to be sure; but what if the best way you know how isn’t enough? For the last 60 years we have run our businesses on the certain knowledge that things would eventually get better. “This, too, shall pass.” “What doesn’t kill you just makes you stronger.” “There is a light at the end of the tunnel.”
How would you change what you are doing if you knew that this was the way things were going to be for the forseeable future? Do you really believe that your customers are going to become less cost-conscious in the next few years? Do you think that government spending is going to increase? Will consumers regain access to easy credit to spend beyond their means? Will housing prices that have fallen by 40% or more recover in the next two years, or three, or five?
Of course not. Running your business on the assumption that everything will soon go back to the way it was is simply foolish. I think that most business owners would agree with me, at least when the questions are presented in this way. Yet most of us continue to operate our companies as if we are in a temporary trough. We have an ingrained assumption that recessions are followed by expansions.
Japan discovered that wasn’t necessarily true, or at least it wasn’t true for everyone. After their bubble burst in the early 1990’s, the Japanese economy remained moribund for the next ten years, and isn’t much better today. The rest of the world boomed, and didn’t seem to mind that its third largest economy wasn’t along for the ride.
There are lots of reasons to think that we could follow that same pattern. Our issues are systemic. For my newer readers, I refer you to my post of January 2009 on dealing with the recession and what was to follow. I put it here simply for credibility. It wasn’t clairvoyant, but rather a simple look at the facts and figures. They haven’t changed in the last 3 years. They won’t change tomorrow.
Our tendency in difficult times is to hunker down and tough it out. You can’t do that indefinitely. Most of my clients are making money, but generating a profit is harder, and they are working more. If we are to succeed in a new economy, it will be by doing things differently.
In the coming weeks I’ll discuss what those factors are that make it different this time. Then we’ll discuss what we can do about it. Every crisis has opportunities, but it is certain that those opportunities do not involve just doing what everyone else is doing.