Posts Tagged 'economics'

Day/Month/Quarter at a time!

Catching up on the ever-growing pile of reading to do,  I was struck by the number of articles across publications which point to the need for flexibility, the need to be nimble and the great deal of uncertainty which still exists in the US economy and across the globe.

Yesterday I received a periodic e-mail blast from Kraig Kramers, author of CEO Tools – a great book by which to manage – who said [I quote the article in its entirety]:

“Twelve Seasons at mid-year:  it’s a good time to re-evaluate economic trends and what they mean for our businesses.

“What many are seeing is the downturn slowing; some are citing hope as the harbinger.  My own view is that some economic indicators are degrading more slowly, yet there are still so many indicators that overwhelmingly say we’re still sliding into this recession headlong.  And, “hope” is not a good business strategy, so please don’t heed the “hopeful” rhetoric from Government and the parroting by media as hope tries to lull you into running your business as if things are on the mend.  They aren’t (yet), except in a few very rare sectors, geographies and industries.

“Unemployment has become the leading key indicator since it has consumers scared to death and continues to cause curtailment of their spending severely.  Many people who were not going to lose their homes now are, and the commercial real estate sector is now showing strong signs of decline, with deterioration not far behind.

“What this implies to me is that we can only see about three months out right now.  The stimulus packages (trillions of our tax dollars) are not being spent, certainly not coherently, and are going virtually nowhere…at least so far.  Less than $200 million of the original $800 billion has actually been spent.  It’s just not happening…yet…and probably not real soon.  Plus, it’s not aimed at most industries, just some.

“The economy continues downward, and some are saying bankruptcies will be even greater in 2010, while they’re already up in 2009 by 240% over 2006.  Again, we can only see with some certainty about 3 months into the future right now.

“So, my thought would be to set your goals and do your plans only 3 months out, and re-assess each month.  As we’re able to see somewhat clearly further out, then open up your range to 6 months and start implementing your growth and recovery plans.  There are some recovery things you can start to do now, but do continue to deal with the downturn while planning for growth.  The really savvy economists are saying we’ll bottom by the end of this year, but have a slow, very drawn-out sectoral recovery (meaning each industry will start recovery at different times and at different rates of speed).  So, watch carefully, frequently, and adjust accordingly.

“Really hope I’m wrong about the economic observations made above and that it’s much better than it looks.  As always, hope this makes sense for you and your business.” [END QUOTE]

That makes perfect sense to me, plan for the next 3 months at max.  Set monthly goals, weekly to do lists and work on a daily basis to make the plan a reality.

Good luck, to all of us!

That’s where the money goes!

I know I said I wasn’t going to look anymore (at the “financial crisis”) but really, I was just reading along in Good Magazine recently (the spring 09 issue) and these incredible graphic displays caught my eye.  But this was too good to pass up.  Check it out!
http://awesome.goodmagazine.com/transparency/usersubmissions/financialcrisis/cypher13/

And if you’re interested in the subject of information transfer – that is how to translate complex information into understandable building blocks which can be utilized effectively, then you’ll want to investigate the work of Edward R. Tufte.  His book “Visual Explanations” sits on my coffee table and provides not only good examples of effective information transfer but also poetic and beautiful images.

Check out http://www.edwardtufte.com/tufte/books_vdqi.

Affluenza – do you have it?

Maureen Dowd in the NY Times today said that we are currently struggling to get over our “affluenza.  That condition, the bane of the middle class, is defined in a book of the same name as ‘a painful, contagious, socially transmitted condition of overload, debt, anxiety and waste resulting from the dogged pursuit of more.'”

As I walked back from dinner a couple nights ago with the ever-refreshing Linda Case, we discussed the need to find satisfaction in simplicity.  And I certainly don’t mean to suggest that you should look to the magazine “Real Simple” which suggests that $350 cashmere sweaters represent simplicity.  It doesn’t – it’s just “more stuff-porn” intended to convince consumers that they’re living an elegant and simple life by spending more on it.

Last night I was nearly side-swiped by a Black Escalade with tinted windows.  The license plate read “Buddha”. Was he Buddha?  I doubt it, not unless the reincarnated Buddha suffers from affluenza!

Read the entire column at http://www.nytimes.com/2009/04/01/opinion/01dowd.html?scp=2&sq=Maureen%20Dowd&st=cse

Runway – a new definition for an old word!

The old definition – a path or a roadway over which something runs – has been updated for the times to mean: the length of time your company has until it runs out of cash.  Jason Calacanis, a successful geek entrepreneur (and I use that word with all due respect)  said the following:

“You need to figure out your runway immediately. This is really easy to
calculate: you look at how much cash you burn every month and divide
that into how much cash you have in the bank. Your accountant can do
this for you or you can simply look at your P&L and bank statement.

Once you know how many months you’ve got left, you’ve got to do the
hard work of trying to extend it by at least 1/4. This means cutting
staff, negotiating with your landlord and cutting any and all
recurring bills. You then need to look at your revenue streams and
figure out if you can double them. In most cases, if you do these two
simple things, you will have increased your runway by 50-100%.
If you double your runway, your chances of figuring out what your business
actually is will go up exponentially.

You also need to do a monthly P&L review with your management team.
Look at every single recurring cost you have and figure out how to cut
it. In an up market, this level of obsessiveness is often wasteful,
because you’re in a race to take market-share. In the case of MySpace
vs. Friendster vs. Facebook all having unlimited funds for a period of
time, this makes total sense. Why worry about $100,000 in server costs
if you’re racing to see who gets bought for a billion dollars first?
However, this is not that time. You have to change your style.
There are times to hit the gas and there are times to conserve your gas.”

So do you have enough cash to ride out the next 6 to 9 months until things turn around, assuming that’s the period of time in which thing do turn around?  If not, what where will it come from?  Or what are your alternatives?

Read the entire article at http://calacanis.com/?s=runway

Read more Jason Calacanis at http://calacanis.com/2008/09/29/the-startup-depression/

I blinked!

I know I said I wasn’t going to read anymore about the economy but I couldn’t help it, really, I couldn’t.  The tag line to Friday’s The Motley Fool was “Is this the Market Bottom?”.  I couldn’t resist it … I had to read it.  You don’t need to read it, I’ve done the hard work so I’ll just cut to the chase for you … nobody knows.  And you’ll only know in hindsight.  But as I read the comments, one in particular from WatcherAl jumped out at me.  I’ve copied it below for your reading pleasure.

“Forget past history, investment theory, pontificating pundits and all wishful thinking – we have entered a new paradigm that is still emerging. When the consumer credit card crunch hits later this summer, the second great tailspin will resume. The US economic system is far more damaged than we are being told – the same accounting & legal firms that aided & abetted the likes of Enron have been fronting the whole derivatives debacle, so off the books debt is hidden all over the place, and, in the meantime, we have outsourced much of our real economy and replaced it with post-dotcom fluff. The bad news is coming out in dribs & drabs with enough time in between to manage FUD and reset the markets lower & lower without loosing utter panic. The road to recovery will be paved with experimental maneuvers: Federal stimulus spending, writing down trillions of debt, defending a wobbly US dollar currency, getting international cooperation on stricter banking rules & transparency, and moving from a debt-driven consumption propelled economy to a long-term sustainable one. Meanwhile, emerging export economies will have to learn to consume & spend, while China will have to learn to be a responsible global economic power – a tall order for a Communist controlled society that is tempted to do some power grabbing while Uncle Sam is in the ICU. So, do yourself a favor: invest in creating a more sustainable lifestyle for yourself that won’t leave you overly dependent upon a vast chain of questionable players who may decide to yank your leash from time to time just to show you who is really in control. And if you really do want a better world for your grandchildren to live in, engage with this current administration and help them to do the right thing. You have an Ivy League A student in the Oval Office now, instead of that grade C sock puppet with the Bin Laden Family & Enron buddies, so he’s probably much smarter than you are – help him to sort through all of the conflicting advice and find us a workable path out of this firestorm and onto safe ground once again. Take a few bucks down to your local soup kitchen or homeless shelter, and invest in your beleaguered fellow citizens. Greed & perpetual self-interest are what piloted us onto the rocks – so isn’t it time to try something else for a change? Get involved… care.”

What do you think?

This week, this new week, I’m going to try harder NOT to read this stuff, but today I fell off the wagon.

Hope your week is good too!

Train Wreck or a Plane Crash?

As an economics major I’ve watched the economy ‘unravel’, to use Paul Krugman’s term, with a sense of increasing fascination combined with dread.  I’ve often called it a ‘slow train wreck’.  As a consultant to the remodeling industry I’ve noticed  a certain tension in the air since spring 2008 as even the most successful and knowledgeable  owners of companies and leaders of the industry held fingers to the wind in an attempt to ascertain speed and direction.  And having recently finished “Outliers” by Malcolm Gladwell  I was struck by the similarities between his description of landing a jet on a slippery dangerous runway in the middle of a windstorm and our current economic  situation.

Dictionary.com defines “wind-shear: a  condition, dangerous to aircraft, in which the speed or direction of the wind changes abruptly.”  On the same page it suggests comparing that definition to “Micro burst:  a sudden, violent downdraft of air over a small area. Microbursts are difficult to detect and predict with standard weather instruments and are especially hazardous to airplanes during landing or takeoff.”

So between these two metaphors: the train wreck or the plane crash – which more closely describes what we’re experiencing?

I’m leaning toward the plane crash because of the greater complexity of maintaining control of a plane and its greater vulnerability to erratic phenomenon – wind shear among them.  The article below from Time Magazine lists the 12 primary causes of this crisis according to its author, Justin Fox, and seems to support my analogy by the sheer magnitude of the combined failures, any one of which alone might have led to a minor train wreck instead.

http://www.time.com/time/specials/packages/article/0,28804,1869041_1869040_1869030,00.html

“Put not your trust in princes!”

Every Sunday morning I sit down with the NY Times and quickly move to the Business Section to read the latest from Ben Stein – we may not agree on many things, but his analysis of the current economy is usually spot to me!

In the January 11, 2009 column entitled “Ordinary People vs. Extraordinary Problems” which contains the title line of this post.

He says of members of the Obama administration:  “…they are just human beings, albeit in some cases human beings with glowing résumés. I do not see the supermen and superwomen. They do not have the gift of foresight. They have never been in a situation like this, at least not exactly. There is simply no good reason to believe they will get it right except by trial and error, turning the tumblers until the safe eventually opens. The problems we face now are so large that they humble the average and the above average and even the very much above average.”

Read the entire column:  http://www.nytimes.com/2009/01/11/business/11every.html