Smart Economy

Deciding if the glass is half full or half empty ? Are you a optimist or pessimist?

 

A brand new issue, an uncertain ambiguous item or an unexpected discovery falls on your desk on Monday morning. You need to quickly decide if it’s an immediate threat or opportunity for your organization that requires some type of action or if it’s a non-issue that can be ignored for the time being.

How do managers or entrepreneurs decide  that? Are there tradeoffs? People often use the half full or half empty glass visual as a metaphor to distinguish between the optimists (opportunity seekers) and pessimists (threat-focused or threat  avoiders). But it’s not as easy as it may seem at first. To decide which side of the ledger you fall under, try the following three steps

 

1) Trust your gut feel

Trust you initial gut feel. You will find that you are usually right. How do you feel about issue X? What does your instinct tell you about this new or emerging  issue or situation? Is it an opportunity or threat? Or possibly both?  In the Opportunity Clinic we typically observe four different responses:

-I feel positive and optimistic about this issue

-I sense a queasy feeling in the pit of your stomach. I’m  mostly negative and pessimistic about this. 

-or are you simply Indifferent or  passive?  I don’t see any current or future impacts on my business.

-or are you uncertain? It could be both a threat or challenge or an opportunity, depending on changing or uncertain circumstances

What’s your gut answer? __________________________

 

2) Try a more rational, critical analytical approach

Run through the list of 31 attributes and opposite matching pairs below in Table 1. On each line, circle an attribute (with a solid line) either on the left or right hand side of the table depending on how you view an issue. If you are unsure, draw a circle with a dotted line, to remind you to look for more information to reinforce your decision.

Count up the number of circles in each column to tell you if you view the issue as a threat or opportunity or possibly both.

Has you view changed from your gut feel decision in step 1 or has it been reinforced?

 

3) Repeat step 1 and 2 with others

Repeat step 1 and 2 with others in your department, division or other parts of the organization. What do external stakeholders say? What’s the general consensus on an emerging issue?

 

Table 1-How do you view an emerging issue? Attributes to tell you if the glass is half full or half empty?

	Opportunity	Threat
1	Positive	Negative
2	May gain, won’t lose	May lose,  won’t gain
3	Have means to resolve	Others constrain your actions
4	Qualified to act	Under-qualified to act
5	Have Autonomy	Resolution initiated by others
6	Resolution is likely	Resolution unlikely
7	Have choice whether to act	Must act, pressured
8	Future focused	Embedded in the past
9	Benefits come from acting vs inaction	Action brings no benefits
10	Stimulating
11	Can gain personal advantage	Personal loss from acting
12	Want association	Desire no association
13	Have responsibility	Not responsible
14	Issue is visible	Issue is visible
15	Many solutions vs one solution	One solution
16	Unique
17	Agree how to resolve	Conflict about  how to resolve; Resolution will be by chance
18	Easy to resolve	Difficult to resolve
19	Obvious Solution
20	Not crisis	Crisis
21	Urgent	Urgent; Not urgent
22		Neutral;  won’t loose or gain much
23	Future better if issue resolved	Future no better when resolved
24	Enduring vs Temporary
25	Pressure, vs No pressure
26	Stress-full	Stress-full
27	Success or failure visible	Success or failure visible
28	High priority	Ambiguous priorities
29	Consequences / implications for the future	Consequences / implications for the future
30	Challenge	Challenge
31	In direct competition with other opportunities

From the Opportunity Clinic © 1985-2009  (adapted from Discerning Threats and Opportunities from Jackson and Dutton 1988) and the soon-to-be released book: Opportunity-45 Scenario to drive your business in challenging times by Walter Derzko, published by J Wiley and Sons 2010

Walter Derzko

 

The Opportunity Clinic-28 tactics for managing your business in a recession-Part 17 Leapfrog your competition

In a professional bike race, the race is unusually won on the harder, uphill climbs, where also-rans can leapfrog the leaders, who might fall behind on the steeper inclines. The same is true at the national level in a recession, where countries can leapfrog their direct competitors by introducing and commercializing novel and disruptive innovations to give their industries a competitive advantage, when heading out of a recession. Many countries may be ignoring this once-in-a-hundred-year opportunity space.

Professor Sorin M.S. Krammer, from the   Rensselaer Polytechnic Institute, Economics Department,  Troy, NY, USA, writes in a paper entitled: " Drivers of national innovation in transition: Evidence from a panel of Eastern European countries ."

 Abstract

Innovation plays a crucial role in determining today’s economic growth patterns. But what enables some countries to innovate more than others?

This study attempts to answer this question by analyzing in premiere a panel of six Eastern European transition countries. It provides a detailed description of innovation identifying regional differences in terms of historical heritage, technological specialization, commitments and main actors involved in this process, before and after the fall of communism. Secondly, it explores empirically the main drivers of their innovative output, proxied by patents, using a variety of econometric techniques and control variables. The results confirm the crucial role of universities and existing national knowledge base complemented by R&D commitments from both public and private sources. Policy measures, such as intellectual property rights protection or a favorable business climate, increase significantly the propensity to patent, while measures of transitional downturn and industrial restructuring diminish it. Finally, globalization contributes to developing new innovations in these countries through inflows of foreign investment and trade.

Source: Opportunity Clinic and Research Policy Volume 38, Issue 5, June 2009, Pages 845-860

 Walter Derzko, Smart Economy, Toronto

Author of the soon-to-be-released book: Hard Times Golden Opportunities.. about opportunity recognition in a recession/ depression featuring 45 opportunity scenarios.

The Opportunity Clinic-28 Tactics for managing your business in a recession. Part 16 of 28 Shortage Opportunities

In writing my new soon-to-be-released book Hard Times Golden Opportunities, I discovered that  one of the most underated and overlooked opportunty spaces are "shortage opportunties." They can occur in both boom times and in market reversals, busts and recessions.

A good example is AirBnB.com which is profiled this week in Time Magazine. Joe Gebbia and Brian Chesky were classmates at the Rhode Island School of Design (RISD). A few years ago, they moved to San Francisco with the vague intention of starting a business.

Time writes:

 

“Their eureka moment occurred in October 2007 when a huge design conference decimated the supply of hotel rooms in the city. They decided to try their idea without mapping it out [i.e. without any prior business model or business plan].

"We thought, Why not host people in our own apartment?" Gebbia said. "It was a way to make a few extra bucks to offset our already expensive rent." The guys had an extra bed, a sofa and an air mattress and decided to offer, via the conference's website, ad hoc bed-and-breakfast accommodations. Thus was born AirBnB.com. They made $1,000 that week and were shocked to find that their customers weren't teenage slackers but were instead older folks, including a 45-year-old father of three. Said Gebbia: "It completely blew away our assumptions."

Since they had no money, they quickly enlisted as their partner a former roommate, Nathan Blecharczyk, who had some technical skills. He built the website--which was initially aimed at cities with big conference calendars--and made it easy for hosts to offer low-rent lodging to visitors. AirBnB.com handled the financial transaction between guests and hosts and took 10% from the guests and 3% from the hosts.

 

Traffic grew. Along the way, the guys listened to their customers, tweaked the site and got free press by arriving at high-profile events, like the 2008 Democratic Convention, that were suddenly short of hotel space. Tapping their RISD backgrounds, they designed fanciful Obama O's and Cap'n McCain's cereal boxes and sold $30,000 worth as collector's items, which kept them going. With their guerrilla lodging site and their cereal boxes, they got on CNN, on many local newscasts and in the New York Times and the Wall Street Journal. And their site grew--enough to garner $20,000 from Y Combinator, the venture firm.

Today AirBnB.com has nearly 12,000 registered users, with more than 3,000 properties nationwide, Gebbia said. "As the economy gets worse, our business gets better." Again, this is a get-rich-slowly scheme: the business generates enough money to house and feed its three founders, who live together in an apartment that doubles as their workplace."

 

Source: The Opportunity Clinic (c) 2009 and Get Rich Slow Josh Quittner. Time. New York: Apr 20, 2009. Vol. 173, Iss. 15; pg. 42

Walter Derzko, Smart Economy, Toronto

Author of the soon-to-be-released book: Hard Times Golden Opportunities.. about opportunity recognition in a recession/ depression; 45 recession-based opportunity scenarios.

When will the recession / depression end ? Part 25 New Financial sector Business Models or New Creative Workarounds?

I listened to US president Obama last Wednesday on the White House lawn, just before AIG’s CEO Liddy testified before the American congress on AIG’s bonuses. The significant point that Obama made at the end of his speech, was a fundamental change or shift to the status quo. Coincidentally or not, most mainstream newspaper reports missed this key idea and quote.

“People are rightly outrages about these particular [AIG] bonuses. But just as outrageous is the culture that these bonuses are a symptom of., that have existed for far too long. A situation where excess greed, excess compensation, excess risk-taking have all made us vulnerable and left us holding the bank. And  one of the message that I want to send is as we  get out of this crisis, as we work towards getting ourselves out of recession, I hope that Wall Street and the marketplace don't think that we can return to business as usual. The business models that created a lot of paper wealth but not real wealth in this country and have now resulted in crisis can't be the model for economic growth going forward." said Obama.

The New Yorker magazine featured this cartoon (on the right) earlier this month (March 9, 2009) , which is a more likely scenario for the financial sector….One business person says to the other….These new regulations will fundamentally change the way we get around them…

 

Walter Derzko;

Author of the soon-to-be-released book: Hard Times Golden Opportunities.. about opportunity recognition in a recession/ depression features 45 opportunity scenarios.

The Opportunity Clinic-28 Tactics for managing your Business in a Recession; Part 15 of 28 Drop problem-solving and adopt opportunity surfing

Why problem-solving, Total Quality Management (TQM), Continuous Improvement (CI), Value Network Analysis (VNA) etc is not good enough in a recession…..you  need to be totally focused on designing and /or finding novel  opportunities. These tools have their place, but it's usually in the upswing part of the business cycle to improve efficiencies of existing operations, but not now.

Many companies are still applying the pre-recession, boom-time mentality to today’s totally changed and novel business environment. Driven by existing business models, mindsets and existing ongoing relationships with  consultants, experts, suppliers and vendors, who are desperately trying to maintain their sales numbers and quotas, companies are continuing to do more of the same…what seemed to worked for them in good  times..lets' work in the same box. What we need is not "out of the box thinking" [I hate that expressionm becuase it shows that you don't understand cognition and how the brain patterns information], but to design brand new "boxes".  

 

The recession is not a problem to be solved, it’s a crisis to be avoided. And you  can only do that in one way. NOW, you need to be totally opportunity-focused and opportunity-receptive and less problem-focused and preoccupied with incremental change. Radical ideas and concepts, (and not accruemental solutions to old problems, unless they lead to novel opportunity spaces) are in order, along with resulting new business models (which we often forget to explore and redesign ), that will help companies thrive and not just survive in a recession.

 

See the cartoon in this week's New Yorker....We're still the same great company we've always been, only we've ceased to exist.  I bet they were great problem-solvers at the tactical, operational level, but poor opportunity surfers at the strategic level.

 

Walter Derzko

Smart Economy,

Toronto;

Author of the soon-to-be-released book: Hard Times Golden Opportunities.. about opportunity recognition in a recession/ depression features 45 opportunity scenarios.

 

When will the recession / depression end? Part 24 Wanted -a new economic driver

This week's Newsweek features a cover story with Uncle Sam urging you to stop saving and to start spending...in other words do what got you into trouble in the first place..spend or go into debt for the sake of the economy. It's not likely to happen soon.

In a recently published book, called "The Difference: How Anyone Can Prosper in Even the Toughest Times." by Jean Chatzky, the results of a 2008 Harris Interactive poll/ survey on income was pubished.

• 3% in the USA are indepently wealthy (usually bigger savers, as a rule)
• 27% in the USA are comfortably wealthy (recently earned money and wealth, and tend to save more then spend)
• 54% in the USA live pay check to pay check (driving most retail spending, the classic consumer)
• 15% going deeper into debt

These are 2008 numbers, so that the stats today are likely much worse.

So if ordinary Americans aren't going to spend their way out of this recession / depression. then who will? Business ? No liquidity yet. It may just take another country, if not another coninent to take over the "consumer" moniker from the USA.

Walter Derzko, Smart Economy, Toronto

Author of the soon-to-be-released book: Hard Times Golden Opportunities.. about opportunity recognition in a recession/ depression features 45 opportunity scenarios.

When will the recession / depression end? Part 22 Why we are likely to see a protracted L-shaped or double dip W-Shaped Recession?

Collapsed container traffic  and falling electricity demand

 

 

GDP growth or collapse is a poor early warning indicator for the economy. Figures are historic -they are released several months (usually 3 months) after the fact and the are then usually revised. As politicians are fond of saying, we've seen a global symmetric  (I'd argue.. asymmetric) collapse in GDP.

 

Here are the recently released GDP numbers for the 4th quarter of 2008.

 

Canada (-3.4%)

The EU (-5.9%)

The USA (-6.2%)

Japan (-12.7%)

 

Everyone is expecting even worse numbers in Q1 2009.

 

One proxy indicator that I follow is global trade. Back in 2006 and 2007 I was  looking for early signals/signs of impending collapse and now I’m tracking trade to determine if the economy will be in a protracted holding pattern (like the lost decade in the 1990’s in Japan, although it should be called the lost 2 decades) or will we see some resemblence of any recovery of international trade any time soon?

 

Bulk goods and container traffic is a good leading 6 month proxy for the economy. Manufacturers order raw materials in anticipation of manufacturing growth. In America, the container traffic in Long Beach California (the busiest port in the USA)  totally collapsed in 2007, long before there were any signs that the economy had peaked. Container traffic, dry and wet bulk goods traffic and shipping rates have been down and flat ever since-at historic low levels. If you use these indicators, there is ABSOLUTELY NO RECOVERY  in sight for 2009. The Baltic Dry Index (BDI) is showing some signs of life, but it's a type #1 error, also known in academics as a false positive. Suppliers are using some creaive accounting by attempting to take their goods "off their books" shifting them into the F.O.B catagory, but these raw materials, assembled cars and even oil supplies are just sitting inside container ships in ports, awaiting for commodity prices to increase. (hat tip to Zavis Zeman for alerting us to this tactic)

Power consumption is another good indicator to watch that signals the health of the economy. (the same is equally true for industrial use of coal, gas and oil, if you can find the data.)

 

Historically, electricity consumption and GDP growth are closely coupled, although there is still debate in the academic literature on what causes what. Does electricity use drive GDP growth or the other way around.Energy conservation efforts are starting to confound the data too.  When I can find it, I use monthly and annual power consumption data as a proxy indicator for economic recovery. The logic is simple. If you are not running a second or third shift, or if you have closed down your factory, then energy use will drop long before we see any GDP changes in government statistics. Likewise, on the way up, energy consumption should be flat and then start to slowly rise before we see any effects in GDP numbers.

China and India have become the world's manufacturers, so their health is a proxy indicator for global economic health. Both China and Indiahave reported drastic energy consumption drops in their industrial sectors. Starting in late 2007 and right through 2008,

China reported a drop in consumption, although relative year-over-year, power consumption was positive, still growing but at a much slower decelerated pace. As the global financial crisis began to take a toll on the real economy, power demand plummeted in China, as enterprises shut down or cut back working hours in response to moribund business orders.

"Power consumption in China grew 5.23 percent in 2008, 9.57 percentage points lower than a year ago and the slowest in eight years, according to Chinese data. The slowing demand was mainly contributed by the industrial sector.  About 3.43 trillion kilowatt-hours of electricity was used by the industry last year, up 3.83 percent from a year earlier, slower than the overall social power consumption growth rate for the first time.  Electricity used by the service industry and the rural and urban residents continued rapid growth, as the group was less affected by the financial crisis."

In India, power consumption grew 13.28 % in 2007 (a combination of industrial use, consumer household use, and village electrification) and dropped off the cliff by 16.91 percent in 2008, worse then in China.

 

Walter Derzko

Author of the soon-to-be-released book: Hard Times Golden Opportunities.. about opportunity recognition in a recession/ depression features 45 opportunity scenarios.

Related Recession / Depression Posts

When will the recession / depression end? Part 21 Darker days ahead , but not for all

When will the recession / depression end? Part 20 The Dog that Didn't Bark; Economists say don't pay attention to us

When will the recession / depression end? Part 19 Put Infrastructure Where it's Needed; Ontario on the Move

When will the recession/ depression end? Part 18 Hormones and Boom and Bust Cycles

When will the recession / depression end ? Part 17 Recap from the World Economic Forum in Davos

When will the recession end? Part 16 It's all over, well sort of.

When will the recession end? Part 15 Year-end predictions for 2009 starting to come true

When will the recession end? Part 14 Four options for America's race to the bottom

When will the recession end? Part 13 Thirteen economic questions that economists can't answer

When will the recession end? Part 12 Bad times are good times for startups

When will the recession end? Part 11 Bank of Canada optimism

When will the recession end? Part 10, The Conformity Trap or Don't count on your economist for advise

When will the recession end? Part 9 Humor will signal recession /depression bottom

When will the recession end? Part 8 Lessons Learned from the last Post 9/11 recession; designing brilliant winning business models

When will the recession end? Part 7 False signals of recovery

When will this recession end? Part 6 The USA Paradox; Cheer vs Fear vs Transformation

When will the recession end? Part 5 Stop Auto Industry Bailouts, start buying Electric

When will the recession end? Part 4 The double dip housing crash in the USA

When will the recession end? Part 3 The coming collapse of the American Middle Class into an Underclass

When will this recession end ? Part 2 Do you listen to the Optimists or the Pessimists in 2009?

When will this recession end?

82 Signposts to the current Recession Depression Summary from 2008

© 2005-2009

Walter Derzko -"Changing the world, one idea at a time"©

Expert, Consultant and Keynote Speaker on Emerging Smart Technologies, Innovation, Strategic Foresight, Business Development, Lateral Creative Thinking and author of an upcoming book on the Smart Economy "

The Smart Technology Blog: The Smart Economy -- Read, enjoy, explore, speculate, comment !!

To arrange for an in house presentation or briefing on smart technology see here

To explore the opportunities and threats of any new smart technology in your industry - Contact Me or explore how we can work together

• ".....Strategy without action is a day-dream; action without strategy is a nightmare"-old Japanese proverb
• ".......Ours is the age that is proud of machines that think and suspicious of men who try to." -- H. Mumford Jones
• ".......Without changing our patterns of thought, we will not be able to solve the problems we created with our current pattern of thought."  --A. Einstein
• ".......Change is difficult, but complacency and stagnation are surefire showstoppers..." --Walter Derzko

• ".......Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it's the only thing that ever has."  -- Margaret Mead

• ".......Small minds discuss people; Average minds discuss events; Great minds discuss ideas; --Anon

P. S. if this is your first visit to my blog, please go to our Welcome page

The Opportunity Clinic - 28 Tactics for Managing your Business in a Recession Part 14 of 28 Which country is the most opportunity savvy in this recession?

Most politicians and economists now all agree that the world is in the throws of a total synchronous recession, if not depression. But which countries are the most resilient and get the fact that change and chaos produces opportunites?

 

Using the number of English language media stories about spotting or designing opportunities in a recession as a very crude proxy indicator, I started looking at several free and paid databases for public stories concerning the recession and opportunity recognition.

 

Which country is the most Opportunity Savvy in this recession? Who seems to be on top?

1)       The UK

2)       The USA

3)       India

4)       Canada

5)       China

The first two results many be biased because the recession /depression is far more advance in these top two countries, and the fact that I was just looking at the English language press only, but if media coverage is a reflection of societal mindsets, then the UK seems to be way ahead as a very opportunity savvy nation-their business people get it.

 

© 2005-2009

Walter Derzko -"Changing the world, one idea at a time"©

Author of the soon-to-be-released book: Hard Times Golden Opportunities.. about opportunity recognition in a recession/ depression features 45 opportunity scenarios.

Expert, Consultant and Keynote Speaker on Emerging Smart Technologies, Innovation, Strategic Foresight, Business Development, Lateral Creative Thinking and author of an upcoming book on the Smart Economy "

The Smart Technology Blog: The Smart Economy -- Read, enjoy, explore, speculate, comment !!

To arrange for an in house presentation or briefing on smart technology see here

To explore the opportunities and threats of any new smart technology in your industry - Contact Me or explore how we can work together

• ".....Strategy without action is a day-dream; action without strategy is a nightmare"-old Japanese proverb
• ".......Ours is the age that is proud of machines that think and suspicious of men who try to." -- H. Mumford Jones
• ".......Without changing our patterns of thought, we will not be able to solve the problems we created with our current pattern of thought."  --A. Einstein
• ".......Change is difficult, but complacency and stagnation are surefire showstoppers..." --Walter Derzko

• ".......Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it's the only thing that ever has."  -- Margaret Mead

• ".......Small minds discuss people; Average minds discuss events; Great minds discuss ideas; --Anon

P. S. if this is your first visit to my blog, please go to our Welcome page

When will the recession / depression end? Part 21 Darker days ahead , but not for all

(Credit: This prophetic cartoon on the right appeared in one of the fall 2008 issues of the New Yorker magazine. It delivers several important messages from negative (depression, gloom and doom) to Positive (i.e what's the silver lining behind every cloud, or the opportunity behind every threat;  resilience, and make do with what you got!)

I was reminded of it after reading this morning's news from Canada’s  Globe and Mail newspaper-Dark(er) Days Ahead

The quarterly C-Suite survey was conducted for The Globe and Mail; Report on Business and Business News Network by Gandalf Group, and sponsored by KPMG. The survey interviewed 150 executives between Jan. 29 and Feb. 12. Respondents represent ROB 1000 companies from across Canada.

Here's a summary:

• 90 per cent of executives expect the economy to decline in the next 12 months                     (Now here is the flaw with most survey methodologies....They never tell me exactly what I really want to know...I always wonder about the extreme outliers. What do the other 10% think and Why? Why don't surveys ever focus on this "left behind" group?...Their ideas are far more significant then the majority. Are they more optimistic, expecting a quicker turnround? Will the economy  be flat or in neutral gear, anemic but not growing or dropping much? Are they just in counter-cyclical business or industry, that's level or even  growing  in a recession or have they just surfaced new opportunities that the majority of us don't see or can't even imagine yet? Are they just plain contrarians or are they still in the denial stage? or Are they doing something creative / innovative that the other 90 % don’t know about? Do they just see more Opportunity Windows, then the rest of us, because they are now more vigilant for new "opportunity spaces" and "opportunity sensitive areas"? and less gloomy? Are they more Opportunity Savvy then the rest of the other 90%. and more personally, who should I be targeting with the Opportunity Clinic workshops? the 10% who already get it or the 90% who don't and may turn out to be a recession/ depression casaulty?) see Opportunity Clinic  

• Half think it will be more than a year before growth returns ie 2010 

• Two-thirds say it is now more difficult than ever to access credit

• Two-thirds say the economy has forced them to focus on the short-term at the expense of long-term growth plans, 

• (significantly) Half are more concerned about corporate survival than they were six months ago.

• Hunkering down for survival now seems to be top of mind for many executives

• The key, said on exec, is to conserve cash and be ready to expand when the economy improves. But he does not expect a turnaround at least until 2010. (N.B.the concensus used to be end of 2009)

• The goal, for everyone, is to ensure survival.

• "If there is an upside to the recession, it is that some competitors will be "weeded out," said one C-suite exec. There might also be deals that can be arranged with landlords who will be willing to offer better prices on available retail space.

• All companies have to ensure they come out of the recession healthy enough to exploit those opportunities..(see the Opportunity Clinic)

Do you agree? (out of 150 c-suite execs)

• I'm confident our company will weather this downturn: 97% agree

• This is the worst economic environment in my time: 82% agree

• The economy has forced us to focus on short-term at the expense of long-term growth: 67% agree

• I am more concerned about our company's survival than I was six months ago: 53% agree

See survey story here>> 

 

Walter Derzko

Smart Economy

Toronto

Author of the soon-to-be-released book: Hard Times Golden Opportunities.. about opportunity recognition in a recession/ depression features 45 opportunity scenarios.

Related Recession / Depression Posts

When will the recession / depression end? Part 20 The Dog that Didn't Bark; Economists say don't pay attention to us

When will the recession / depression end? Part 19 Put Infrastructure Where it's Needed; Ontario on the Move

When will the recession/ depression end? Part 18 Hormones and Boom and Bust Cycles

When will the recession / depression end ? Part 17 Recap from the World Economic Forum in Davos

When will the recession end? Part 16 It's all over, well sort of.

When will the recession end? Part 15 Year-end predictions for 2009 starting to come true

When will the recession end? Part 14 Four options for America's race to the bottom

When will the recession end? Part 13 Thirteen economic questions that economists can't answer

When will the recession end? Part 12 Bad times are good times for startups

When will the recession end? Part 11 Bank of Canada optimism

When will the recession end? Part 10, The Conformity Trap or Don't count on your economist for advise

When will the recession end? Part 9 Humor will signal recession /depression bottom

When will the recession end? Part 8 Lessons Learned from the last Post 9/11 recession; designing brilliant winning business models

When will the recession end? Part 7 False signals of recovery

When will this recession end? Part 6 The USA Paradox; Cheer vs Fear vs Transformation

When will the recession end? Part 5 Stop Auto Industry Bailouts, start buying Electric

When will the recession end? Part 4 The double dip housing crash in the USA

When will the recession end? Part 3 The coming collapse of the American Middle Class into an Underclass

When will this recession end ? Part 2 Do you listen to the Optimists or the Pessimists in 2009?

When will this recession end?

82 Signposts to the current Recession Depression Summary from 2008

 

 

When will the recession / depression end? Part 20 The Dog that Didn't Bark; Economists say don't pay attention to us

Why should we be listening to economists, when so few of them saw this whole mess coming? The Canadian CBC TV Sunday Morning program put that question to two top economists - Dean Baker, of the Center for Economic and Policy Research in Washington, and James K. Galbraith of the University of Texas, son of the famed Canadian economist John Kenneth Galbraith - and ask: whose predictions should we believe now?

These were two of the small group of "minortity" economists, warning of the coming crash, who I have been tracking since the early 2000's ...[BTW, I track "outliers" on all the emerging issues that interest me...ie. I started warning clients about the imminant US  banking system collapse and housing collapse in 2006.]

Why did so few economists see this economic crisis coming? Asks the CBC TV reporter, or what I call the  Dog that Didn’t Bark question.

 

 

Here’s a transcript of what James K Galbraith said:

“…Well I think the  economics profession over that last few decades has kind of closed in on itself, it ceased to discuss history in a serious way and it basically excommunicated that relatively small number  of people, who worked on problems of financial crisis and financial instability.

So, there was no dialogue going on, the prospect was not being raised, the profession was busy congratulating itself on having solving the economic problems, on having basically come up with the right formulas for stable expansion, for the control of inflation and they had completely forgotten that the capitalist system has enormous vulnerabilities that come from of the financial sphere, and in addition to that, they were just unequipped to deal with the catastrophic malpractice that was coming from the financial sector over the last five years, they didn’t have the tools, they weren’t studying it, they were caught blind sided by it.”…[…]….Until the crisis actually broke, nobody was paying attention to us."

Dean Baker replies:

"…I was actually tipped off by Alan Greenspan, back in 2002. He was testifying before Congress and he said there was no problem, no bubble in the housing market. And I was reading his testimony and everything he said did not make any sense. He was giving explanations to why there was this sudden rise in house prices. The basic story is that we have a hundred year long history 1895-1995 where nation-wide at least, house prices had just kept pace with the overall  rate of inflation. In other words, House prices has risen at roughly the same rate as the average  other goods, car prices, clothes, gas, whatever it  might be. Suddenly beginning  in the mid 90’s, house prices began to substantially outpace the rate of inflation and by 2002 they had outpaced the rate of inflation by about  30%. And there was no explanation for it that made any sense, based on fundamentals. So to my mind, when you see a hundred year long trend broken, and there is no explanation,  that’s based on fundamentals, it was sort of crying out: Bubble! Bubble ! Bubble!  And I sort of had bubble on my mind because we had just gotten through the stock bubble, and stock crash. We had two explanations. One -this is being driven by something in the fundamentals that no one could identify or  two --the stock bubble had fed over into the housing bubble as was the case in Japan. So that was seemed to be a pretty easy call to me."

Listen to the full interview..a real eye-opener…

 

And what are most of the mainstream economists saying now..don't worry, it will all be over soon...depending on how you take that....that's what I'm worried about--Walter Derzko.

 

Walter Derzko

Author of the soon-to-be-released book: Hard Times Golden Opportunities.. about opportunity recognition in a recession/ depression features 45 opportunity scenarios.

Related Recession / Depression Posts

When will the recession / depression end? Part 19 Put Infrastructure Where it's Needed; Ontario on the Move

When will the recession/ depression end? Part 18 Hormones and Boom and Bust Cycles

When will the recession / depression end ? Part 17 Recap from the World Economic Forum in Davos

When will the recession end? Part 16 It's all over, well sort of.

When will the recession end? Part 15 Year-end predictions for 2009 starting to come true

When will the recession end? Part 14 Four options for America's race to the bottom

When will the recession end? Part 13 Thirteen economic questions that economists can't answer

When will the recession end? Part 12 Bad times are good times for startups

When will the recession end? Part 11 Bank of Canada optimism

When will the recession end? Part 10, The Conformity Trap or Don't count on your economist for advise

When will the recession end? Part 9 Humor will signal recession /depression bottom

When will the recession end? Part 8 Lessons Learned from the last Post 9/11 recession; designing brilliant winning business models

When will the recession end? Part 7 False signals of recovery

When will this recession end? Part 6 The USA Paradox; Cheer vs Fear vs Transformation

When will the recession end? Part 5 Stop Auto Industry Bailouts, start buying Electric

When will the recession end? Part 4 The double dip housing crash in the USA

When will the recession end? Part 3 The coming collapse of the American Middle Class into an Underclass

When will this recession end ? Part 2 Do you listen to the Optimists or the Pessimists in 2009?

When will this recession end?

82 Signposts to the current Recession Depression Summary from 2008

 

© 2005-2009

Walter Derzko -"Changing the world, one idea at a time"©

Author of the soon-to-be-released book: Hard Times Golden Opportunities.. about opportunity recognition in a recession/ depression features 45 opportunity scenarios.

Expert, Consultant and Keynote Speaker on Emerging Smart Technologies, Innovation, Strategic Foresight, Business Development, Lateral Creative Thinking and author of an upcoming book on the Smart Economy "

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• ".....Strategy without action is a day-dream; action without strategy is a nightmare"-old Japanese proverb
• ".......Ours is the age that is proud of machines that think and suspicious of men who try to." -- H. Mumford Jones
• ".......Without changing our patterns of thought, we will not be able to solve the problems we created with our current pattern of thought."  --A. Einstein
• ".......Change is difficult, but complacency and stagnation are surefire showstoppers..." --Walter Derzko

• ".......Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it's the only thing that ever has."  -- Margaret Mead

• ".......Small minds discuss people; Average minds discuss events; Great minds discuss ideas; --Anon

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