Nov 24

From Boom to Kaboom! Unconventional Thinking and Your Future

Today’s local morning news programs, CNN, MSNBC, and FoxNews, plus, of course, Bloomberg and CNBC are all talking about the US government bailout of Citigroup. It’s all frothy and dramatic. Last night one of my 80 year-old friends told me how much money she has lost in the market (in conservative investments), and she is scared. She said she has enough money to continue to take care of herself, thank goodness. I am almost half her age, so my fear, while palpable, is less urgent; I have more time to build up what I have lost.

But, the fear we feel is met in equal measure with bewilderment. It seems to me business(wo)men and consumers alike have been remarkably irresponsible these past few years. We have been living in a child’s fantasy world, like that Skittles advert where candy rains down from the sky, and there are no consequences for our decisions, and the future is only sunny. When a young friend of mine who has struggled to make more than $50,000 per year bought a $500,000 condo flags went up for me. How on earth could he think he could afford the mortgage (he put nothing down)? More to the point, who on earth would lend him half a million dollars?

The answer is a) by way of creative financing that anyone who was writing about innovation five years ago would probably have applauded and, b) bank managers who really did not know enough to be bank managers convinced him, and themselves, he could swing it. But, there is probably an answer C, also: the world consumer culture made it easy, too. Let’s face it, the bust we are now embroiled in is a world event, and the American consumerism mindset so often talked about as a mindset peculiar to America isn’t.

I just returned from Dubai, where the building boom makes the US building boom sound like a squeak. Many of their new buildings, spectacular as they are, are empty, and yet there are dozens more planned. Exciting and sexy does not sound business make. Just as the spectacular housing boom of the past decade in the US did not make for sound business practice.

Will we ever mature beyond our boom and bust mentality? Will we learn to steel ourselves to the Siren call of booming growth when we know from recent history that busted growth often follows right behind it? What will it take for us to appropriately regulate our inclinations to do what we want to do when other, albeit uncomfortable, actions are more likely to yield better long-term results? This question is at the heart of self-regulation…and strong, wise leadership.

Think of the trillion (that is a thousand billion) dollars now allocated to correct the effects of bad thinking and decisions. That money has surely wiped out many of the advantages gained by the use of the policies it now seeks to remedy, no? I don’t mean to be (totally) glib, or Pollyannaish, but was this avoidable? Could company executives have chosen a wiser path forward these past ten years?

I really don’t know the answer to my questions. When a river swells and picks up speed it is very hard to resist its flow. Maybe I am naive to think a Steady Eddy mentality would have kept more companies, their customers, and their employees safe–or the other stakeholders management had little considered, like the distant citizen affected by the ensuing recession. But, I want to think a more rational, and dare I say it, conservative business strategy is also truly wise, that is, more likely to ensure a more positive, stable, and predictable future.

Just because we feel driven to do something does not mean we ought to do it. Just because the prevailing wind (a.k.a. mindset) blows one way does not mean we have to fly our kites in that wind. Take another example: American auto companies. Detroit’s prevailing wind had it ignorant of or naively ignoring the many trends that have nearly eroded its foundations completely. What might have happened had management and labor looked more carefully at what the Germans and Japanese were doing successfully for 30 years and responded in a completely different way than was their convention/norm/habit?

For many lenders the completely different way would have been not to sell my friend a condo, or at least not one as expensive. For my friend, it would have been to keep renting. For home owners, the completely different way might have been to not use their home’s equity to buy that new car, or upgrade the bathrooms and kitchen.

Like many people, I can get caught up in boom-time naivete. And, in some ways I did. But now I want to really look into the thinking that leads to my actions. I am going to contemplate where in my personal and business life I need to invite in unconventional thinking and even get back to Steady Eddy ways. Maybe you know someone who should, too? [I welcome your thoughts and comments. Feel free to enter them below.]