Smart Economy

The Opportunity Clinic - 28 Tactics for Managing Your Business in a Recession Part 9 of 28 The dichotomous thinking trap

Many novel or even seasoned serial entrepreneurs get struck in what I call the dichotomous thinking trap. The noun dichotomy is defined by Webster’s dictionary as:

1: a division into two especially mutually exclusive or contradictory groups or entities <the dichotomy between theory and practice> ; also : the process or practice of making such a division <dichotomy of the population into two opposed classes>

2: the phase of the moon or an inferior planet in which half its disk appears illuminated

3 a: bifurcation; ; especially : repeated bifurcation (as of a plant's stem) b: a system of branching in which the main axis forks repeatedly into two branches c: branching of an ancestral line into two equal diverging branches

4: something with seemingly contradictory qualities <it's a dichotomy, this opulent Ritz-style luxury in a place that fronts on a boat harbor — Jean T. Barrett>

Dichotomous thinking is narrow thinking that divides the world, your problems or solutions into only two opposing camps: Yes/No; right/wrong; black/white; Ying / Jang; in-source/ outsource etc. Mainly that’s how the brain works in creating information patterns. Many people don’t even bother to think beyond these self-imposed, artificial, cognitive boundaries to come up with a third, forth or fifth option.

Here’s a case study of one Canadian business that broke free of the dichotomous thinking trap (source:  from the Opportunity Clinic^TM   workshop notes)

There’s in-sourcing and outsourcing that most business people consider when they ponder the strategic decision-Do I make things internally or let some else do it? And then they stop thinking at this point, because no other options seem obvious. But what about another angle- I call it “tethered or conditional outsourcing”

"In the late eighties, before the advent of ATM’s and the Internet, a Markham-Ontario based engineering services firm, called  Tertec  had designed a (telephone) networked robotic self standing video tape store system (VideoStar Video Machines) that could not only dispense video tapes, but also take them back ready for rental again, with complete automatic inventory management and a ton of other features that were state-of-the-art back then. 

To produce these video machine kiosks, Tertec had, in the early Nineties a relatively big staff –over 40 people with tools and machinery to process metal, such as lathes, milling machines and the like. This video machine technology business was then sold to a German company called Konzepta GmbH, who also had offices in Calgary, because of their other interests in oil and real estate.   As part of the deal, Tertec built them a plant in Calgary to manufacture these video machine kiosks.

Then they were faced with a problem-the overhead of managing the now-redundant Toronto

mechanical staff, as well as paying them and keeping them busy became a big burden on the firm.  Rather than just lay them off, Tertec tried another creative option-they offered the mechanical staff some of the machines for free, so that they could start their own businesses with the proviso that Tertec would receive priority, if they came to them with jobs and orders.  Some of the more entrepreneurial employees jumped at the chance to start their own spin-off business and agreed to the conditions.  This became a win-win situation for all parties concerned as everybody benefited from the deal. 

The moral of the story:

Rather than laying off people, companies should assist their staff to get jobs elsewhere or help them start their own businesses (with similar conditions that Tertec offered its staff), so that when needed, these people would be ready to help the companies as subcontractors or outsourced workers.  This would mitigate the pain of job losses and enrich the lives of the people as well as benefit the companies in the long run.  As Stelco used to say “Our product is steel but our strength is our people”!

 

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 posts in this series:

The Opportunity Clinic - 28 Tactics for Managing Your Business in a Recession Part 8 of 28 Industry Architecture Opportunities

The Opportunity Clinic - 28 Tactics for managing your business in a recession Part 7 of 28  Geopolitical Opportunities;

The Opportunity Clinic; 28 Tactics for managing your Business in a recession Part 6 of 28 What's in your Recession Playbook?

The Opportunity Clinic; 28 Tactics for Managing your Business in a Recession Part 5 of 28 Category Killer Innovation-India's $10 laptop

The Opportunity Clinic - 28 Tactics for Managing Your Business in a Recession Part 4 of 28 “Left Behind “Opportunities- Go Green & Go Slow

The Opportunity Clinic - 28 Tactics for Managing Your Business in a Recession Part 3 of 28 Design Opportunities- Hope or Nostalgia

The Opportunity Clinic - 28 Tactics for Managing Your Business in a Recession Part 2 of 28 Innovation or Efficiency?

The Opportunity Clinic - 28 Tactics for Managing Your Business (& surviving and thriving) in a Recession Part 1of 28

Related Posts over that past year:

·         Opportunity Recognition in Difficult Times

·         Recession - Proofing your Business - Spotting & Designing Opportunities in a Downturn

·         Recession - Proofing your Business - Spotting & Designing Opportunities in a Downturn – June 25, 2008, Ontario College of Art Design, Toronto, ON

·         Recession-Proofing your Business-Strategies and Tactics for smoother sailing in turbulent seas

·         Master Class in Opportunity Recognition for entrepreneurs and intrapreneurs> May 30th 2008> University of Toronto

·         Turning Misery into Opportunity

·         Vacuum leaves pullout opportunities;

·         How will baby boomers handle the recession? Zoomers, Doomers, Gloomers, Opportuneurs

·         Recession, Depression and Shortages as Opportunities

·         Restructuring of American Business-A New Business Model?

·         Using New Yorker Cartoons for Opportunity Recognition /Sense-making & Pattern Recognition

·         Text Mining for S&T Scouting, Foresight and Opportunity Recognition

·         The Opportunity Clinic-swapping opportunity scenarios 08-002

© 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

The Opportunity Clinic - 28 Tactics for Managing Your Business in a Recession Part 8 of 28 Industry Architecture Opportunities

Most entrepreneurs regardless of whether they are struggling novel start-ups, seasoned serial entrepreneurs or veteran industry incumbents don’t pay enough attention to their own business models or evolutionary shifts in their sector or industry structure, (or what some are calling industry architecture), as an opportunity space to exploit.. When I mention the two terms and ask: Is your business model aligned to the downturn or is your industry architecture changing and are you taking advantage of the shift or driving the shift? I often get a blank stare.  Their eyes usually glaze over, until I provide them with one or two examples. Then the usual response is…(pause) ….(wheels turning in their head, followed by tacit acknowledgment )…good point…..(another pause) …well frankly, I never even thought of that.”

Michael G. Jacobides, who is associate professor of strategic and international management at London Business School, illustrates my point succinctly in a recent Financial Times story.

"Over the past few decades, economic theories have become increasingly sophisticated, borrowing analytical tools from theoretical physics and mathematics. Financial tools have become vastly more complex. Regulators have created sophisticated rules to govern the economy, particularly banks.

So why did we not see this coming?  [some did, but most economists were in denial or played their role as cheer leaders and not objective analysts—Walter Derzko]

And how did last year’s “strong incentives” and “profit-driven behavior” become today’s “reckless profiteering” and “abuse of the system”? [Natural evolution according to one of the effects of Marsal McLuhan's Tetrad model -- "flip or reversal"--Walter Derzko]

The reason is that we neglected basic economic facts and failed to appreciate the evolving structure of arand sectors. In the past decade, what I term the “industry architecture” – the rules and roles that govern how participants do business – in financial services changed the financial world dramatically, but almost nobody noticed. Most economists did not bother – for them, industry structure (in particular, the business models operating in the sector) is of secondary interest – and they stuck to the mantra that “markets regulate themselves”. Regulators ignored the monumental changes in how money was made, concentrating instead on fine-tuning rules that focused on an ever-decreasing part of the business world. Academics busied themselves with models that had less and less to do with reality, helping to create structures so complicated that they were bound to implode. And management gurus did not want to spoil the party by suggesting that there were no solid foundations for this brave new world.”

Industry architecture will change dramatically in many sectors during this re / depression, and business that can anticipate this or drive the change in the direction that favors their products, platforms or services will be the big winners, leaving others behind in their dust.

 

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 posts in this series:

The Opportunity Clinic - 28 Tactics for managing your business in a recession Part 7 of 28  Geopolitical Opportunities;

The Opportunity Clinic; 28 Tactics for managing your Business in a recession Part 6 of 28 What's in your Recession Playbook?

The Opportunity Clinic; 28 Tactics for Managing your Business in a Recession Part 5 of 28 Category Killer Innovation-India's $10 laptop

The Opportunity Clinic - 28 Tactics for Managing Your Business in a Recession Part 4 of 28 “Left Behind “Opportunities- Go Green & Go Slow

The Opportunity Clinic - 28 Tactics for Managing Your Business in a Recession Part 3 of 28 Design Opportunities- Hope or Nostalgia

The Opportunity Clinic - 28 Tactics for Managing Your Business in a Recession Part 2 of 28 Innovation or Efficiency?

The Opportunity Clinic - 28 Tactics for Managing Your Business (& surviving and thriving) in a Recession Part 1of 28

Related Posts over that past year:

·         Opportunity Recognition in Difficult Times

·         Recession - Proofing your Business - Spotting & Designing Opportunities in a Downturn

·         Recession - Proofing your Business - Spotting & Designing Opportunities in a Downturn – June 25, 2008, Ontario College of Art Design, Toronto, ON

·         Recession-Proofing your Business-Strategies and Tactics for smoother sailing in turbulent seas

·         Master Class in Opportunity Recognition for entrepreneurs and intrapreneurs> May 30th 2008> University of Toronto

·         Turning Misery into Opportunity

·         Vacuum leaves pullout opportunities;

·         How will baby boomers handle the recession? Zoomers, Doomers, Gloomers, Opportuneurs

·         Recession, Depression and Shortages as Opportunities

·         Restructuring of American Business-A New Business Model?

·         Using New Yorker Cartoons for Opportunity Recognition /Sense-making & Pattern Recognition

·         Text Mining for S&T Scouting, Foresight and Opportunity Recognition

·         The Opportunity Clinic-swapping opportunity scenarios 08-002

© 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

When will the Recession / Depression end ? Part 17 Recap from the World Economic Forum in Davos

Economists Nassim Taleb and Nouriel Roubini were popular speakers at the World Economic Forum in Davos last week, mainly because they were in the minority of economists that predicted the recession/depression well in advance...( as opposed to most other mainstream economists who were in total denial as late as the fall of 2008.)

A blog post on Seeking Alpha called Fresh From Davos: Taleb and Roubini Summarize Their Warnings captures the key points made by these two speakers about the current re/depression.

Nassim Taleb

1. The same people who did not see the financial crisis coming are still in charge. The same bankers who got us in trouble, are being given more (taxpayer) money. They all need to be thrown out and replaced by people who saw the crisis coming. (He nominated Roubini!)
2. Banks will need to be nationalized.
3. The financial system needs to be more robust against "black swans, discontinuities or wild cards." This will require living with less debt.
4. We need to eliminate the socialization of risk, privatization of profits.
5. Taleb is 100-200% in cash (so he has some shorts), so he can pick up the pieces when opportunity arrives.
6. Taleb believes deleveraging has just begun. There are 4-5 years to go because of the massive deleveraging still required.
7. We should get out of the mentality that we need to build debt on top of housing to drive the economy.
8. Investors should deleverage portfolios. Instead of dedicating 2x to equity, keep more cash and allocate a small portion to out-of-the-money options since you never know what is going to soar (or crash I imagine).

Nouriel Roubini

(note that he tried to shed the nickname Dr. Doom)

1. The condition in labor markets is crucial (in other words, unemployment numbers are NOT lagging indicators right now).
2. We need to resolve problems in the financial system: nationalize insolvent banks, clean them up, and sell them back to the private sector.
3. We need to invest in real (productive) physical and human capital (in other words, stop misallocating so much capital to housing).
4. Going forward, the economic news will be worse than expected. This produces about 20% further downside risk in the stock market.
5. Investors should stay in cash until about 12 months from now.
6. About $3.6 trillion in write-downs are needed to get through this crisis. We are through $1 trillion so far.

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 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 "

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

82 Signposts to the current Recession Depression Summary from 2008

Communication technologies eventually flip and lead to disconnected staccato lifestyle

Technology is not just a double edged sword-paradoxical good and bad effects. It’s far more complex-it’s a quadruple blade or four-edged blade sword.

McLuhan predicted and warned us that every technology or human invented construct has 4 simultaneous effects on culture and society, which strategists and marketers often ignore to their peril. One of them is "reversal or flip". What happens at the extreme when everyone is using technology X? There is a flip or reversal. Cars, which were supposed to be the ultimate transportation devise,  in time have created  gridlock, delays, frustration and pollution, as the system scales up. Sometimes its faster to walk then wait in traffic.

The same subtle "flip" effects are happening in the communication world.

People often ask: what’s the social impact of communication technology X? In fact, that’s the wrong question to ask. They should be asking: what are the social and cultural impacts of the entire family or cluster the technologies that technology X belongs to?  

I’ve coined the term “staccato effect” or “staccato lifestyle”—from the musical definition of staccato

[Music. Cut short crisply; detached: staccato octaves.  or marked by or composed of abrupt, disconnected parts or sounds: staccato applause.]

…because that's what my work day sometimes feels like. 

Communication technologies, which were suppose to help us connect, are starting to have the reverse effect on society. They are disconnecting us by our constant connectedness.--the staccato effect.

We never stay focused long enough on a task, problem or opportunity window to make sense of it, but shift our attention to the next immediate crisis, largely facilitated or accelerated by our range of communication devices. It all started with the photocopy Xerox machine, and has progressed to iphones, email and twitter We are loosing our ability to reflect and our reflection time to make sense of new information….

Think of the last time you had lunch or coffee with someone, who would be constantly interrupting the flow of the conversation by turning to their cell phone calls, email alerts, or twitter text messages.

Our life and job can now be characterizeded as a constantt string of distractions, punctuations or interruptions.

There is an interesting article in the Boston Globe this morning, describing some of the McLuhanesque-like social impacts of communication technology and Information overload and anxiety called: The End of Alone?  At our desk, on the road, or on a remote beach, the world is a tap away. It's so cool. And yet it's not. What we lose with our constant connectedness [Hat tip to Peter Montgomery]. 

 

The author notes:

 

"If you can't remember the last time you were truly unplugged, you've got company".

 

....but later  makes the point about the benefits of solitude:

"Descartes, Newton, Locke, Spinoza, Kant, Nietzsche, Kierkegaard -- they share the distinction of having been some of the greatest thinkers the world has known. They also share this: None of them ever married or had their own families, and most of them spent the bulk of their lives living alone.

In his provocative 1989 book Solitude: A Return to the Self, British writer and psychiatrist Anthony Storr made a persuasive case for the value of deep, uninterrupted alone time. He found it in ample supply in the lives of not just philosophers and physicists, but also some of the greatest poets, novelists, painters, and composers."

but warns that many people now can't deal with being unplugged, (exhibiting classic with-drawl symptoms), which leads me to ask: What would happen to people if the Internet ever crashed for an extended period of time? Could it? Next big solar corona flare? Well remember that they said that the Titanic was unsinkable too.

University of Toronto researcher Rhonda McEwen tracked the communication behavior of students across their freshmen year…[…]… McEwen found in her University of Toronto study that college students are constantly connected to the point of having no concept of a truly unplugged life. There's a time-honored tradition in Canada of "going to the cottage," usually in the summertime, and being blissfully disconnected from the rest of the world. "The participants in my study had real discomfort going to the cottage,"McEwen says. "If there's no cellphone reception, no Internet access, they think, 'What the hell am I doing out there?' "

  

© 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

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

Even I was surprised how quickly the economic situation in the US is deteriorating and how some of my predictions made on Dec 28, 2008 for 2009 are already starting to come true in early 2009..for example...

 Global Hot spots?  PREDICTION [...local US state governments will teeter on the verge of bankruptcy and services are drastically curtailed or eliminated. ]

 

REALITY

On Feb 2, 2009 the State of California announced that it was bankrupt, with a $42 billion dollar budget deficit. The news received relatively little national mass media coverage. Local news stations reported:

"Declaring itself officially broke, the state government will begin issuing IOU's instead of check for grants, schools and any other organization or program which was previously receiving funding. Additionally, your California income tax refund check this year will not be sent out until after a balanced budget is passed. Those who have already filed their taxes will get an announcement noting the delay…[…]… residents won't be getting their state tax rebates, scholarships to Cal Grant college will go unpaid, vendors invoices will remain uncollected and county social services will cease. Services and payments will resume once state legislators come to an agreement on the budget. The Governor's plans involve a mix of spending cuts and a temporary sales tax increase, along with streamlining some of the state government's processes…."

CNN reported: "Some 46 states face budget shortfalls, forcing them to slash funding for many services," …[..]… "But California, the largest state in the union by population, faces a deficit that totals more than 35% of its general fund."

 Global Hot spots?  PREDICTION  [Creeping global protectionism increases, replacing globalization and free trade-Watch for new tariffs in India, China, USA and Russia]

REALITY

Remember back in November of last year at the G-20 conference when all the participants plegded not to stir protectionism. HaHa Fat chance. This round of "verbal" trade wars between Canada and the US will eventually be settled,  by the US congress backing down from protectionist threats, simply because the US does not produce enough local steel and does not have enougth steel-making capacity to meet its emerging infrastructure needs. America also needs to import iron ore from Canada to keep its steel mills going. The "Buy American" rhetoric is  designed for local voter consumption and eventual legislation will likely be watered down, taking Canada off the hook. (see  'Buy American' Rider Sparks Trade Debate.

But this won’t be the last hint of protectionist fights. They will continue globally in more subtle forms in every major trading country

 

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 Posts

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 "

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

All the leveraged debt bubbles (15 in total) that I’ve been discussing on this blog, were not started in 2001 after the last recession, as most people assume. It actually goes back to 1980 or 28 years to mount to these levels. Total US consumer debt in 1980 was a manageable $352 billion. Compare that with $2.6 trillion today. American consumers have increased their total debt level by 738% in 28 years. Revolving credit increased from $56 billion in 1980 to $982 billion today, an order of magnitude increase of  1,750%  in 28 years.

In 1980, the US GDP was $2.8 trillion. Today it’s  $14 trillion and but declining. Since, 1980, American GDP has grown by 500%, but the national debt has grown more than twice as fast as GDP.

 

(Source: stats from the  James Quinn blog )

 

This is an unsustainable trend. America’s  financial debt bubble and resulting economic disaster took 28 years to inflate  and will not likely be fixed in a single year or two, unless the US defaults on its debts As I see it, there are only 4 real options for America's race to the bottom. Take all you bad medicine all at once, but risk overthrow of the current government in power (see options 1) and 2) below)  or prolong the agony and pain of the depression for everyone, possibly for 2 decades like in Japan currently -since 1990. (see options 3) and 4) below)

 

1. Cancel debt & start first-world debt restructuring
2. Default-like the Russians and Argentines did last decade
3. Print more money & live with the consequences-hyper inflation and devalued currency
4. Just keep borrowing more money, assuming the world still has faith in the $US and T-bills-prolong the pain for everyone.

Niall Ferguson makes a case for outright default in a Vanity Fair story - Niall Ferguson: America Needs to Cancel Its Debt

Prudent businesses need to make contingency plans for all 4 cases and ask the right "what -if" questions.

© 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 featuring 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

 

 

The Opportunity Clinic - 28 Tactics for Managing Your Business in a Recession Part 4 of 28 “Left Behind “Opportunities- Go Green & Go Slow

New Rule ? Go Green Go Slower ; a new “left behind” opportunity window

Every human concept or invention has 4 effects according to Marshall McLuhan. As we switch from plastic bags to bring-your-own cloth bags in grocery stores, we see one of these unintended effects or consequences. It’s what I would classify as a “left behind” combined with a  "process" opportunity window, in the Opportunity Clinic ™ ©  jargon. I'm less of a "trends" fan, althought this does present another "opportunity window" because trends such as a shift from plastic to bring-it-yourself (biy) bags are ovbious to most people and the opportunity space gets quickly crowded out.

My good friend Susan Abbott writes about this unintended consequence of the switch in bags on her blog

What happened when everyone started bringing their own bag: the law of unintended consequences

"I just got a call from a good buddy leaving Loblaws, which recently introduced a save-the-planet charge of 5 cents a bag for those no-goodniks that don't bring their own.

"I'm just leaving the Superstore now," says buddy."Everyone is bringing their own bags.

"And you would not believe how this has slowed down the checkout process. At least 30% slower."

I witnessed this myself at a Wal-Mart. The bags are not all the same size. Some are floppy and need to be held open. One guy was handing the bags over one at a time.

Last week when I commented about the cost of human-delivered services, I wasn't even thinking about this.

Researchers like me know how much customers hate waiting in line. They hate watching inefficiency in line. It used to be just the brown rice brotherhood that took their own bag. Soon everyone will be doing it.  Yikes! "

These are touch-points for the opportunity savvy entrepreneur that can 1) recognize this change event or shift and notice the unintended consequences ..they are usually in your face if you only take the time to look and ask a few strategic questions and 2) find and fill an opportunity space or opportunity window here with your unique solution.

Here's a freebee for someone..... design a cloth bag holder for your store-bought cloth bags, so that the checkout clerk can scan and pack groceries right away into your cloth bag, (but not for bags from the competion's store).

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.

Related posts in this series:

The Opportunity Clinic; 28 Tactics for managing your Business in a recession Part 6 of 28 What's in your Recession Playbook?

The Opportunity Clinic; 28 Tactics for Managing your Business in a Recession Part 5 of 28 Category Killer Innovation-India's $10 laptop

The Opportunity Clinic - 28 Tactics for Managing Your Business in a Recession Part 4 of 28 “Left Behind “Opportunities- Go Green & Go Slow

The Opportunity Clinic - 28 Tactics for Managing Your Business in a Recession Part 3 of 28 Design Opportunities- Hope or Nostalgia

The Opportunity Clinic - 28 Tactics for Managing Your Business in a Recession Part 2 of 28 Innovation or Efficiency?

The Opportunity Clinic - 28 Tactics for Managing Your Business (& surviving and thriving) in a Recession Part 1of 28

Related Posts over that past year:

·         Opportunity Recognition in Difficult Times

·         Recession - Proofing your Business - Spotting & Designing Opportunities in a Downturn

·         Recession - Proofing your Business - Spotting & Designing Opportunities in a Downturn – June 25, 2008, Ontario College of Art Design, Toronto, ON

·         Recession-Proofing your Business-Strategies and Tactics for smoother sailing in turbulent seas

·         Master Class in Opportunity Recognition for entrepreneurs and intrapreneurs> May 30th 2008> University of Toronto

·         Turning Misery into Opportunity

·         Vacuum leaves pullout opportunities;

·         How will baby boomers handle the recession? Zoomers, Doomers, Gloomers, Opportuneurs

·         Recession, Depression and Shortages as Opportunities

·         Restructuring of American Business-A New Business Model?

·         Using New Yorker Cartoons for Opportunity Recognition /Sense-making & Pattern Recognition

·         Text Mining for S&T Scouting, Foresight and Opportunity Recognition

·         The Opportunity Clinic-swapping opportunity scenarios 08-002

© 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

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

I was reflecting on all the economic issues over the last six month, that frankly economists have either given contradictory answers to or simply admitted that they do not know the answers to.

1)       Can government spend their way out of a recession or depression and back to prosperity? Isn’t unbridled spending and leveraged debt financing what got us into this mess in the first place? So, is the government trying to tell me that the disease is actually the cure, in the second round of spending? That’s like giving more alcohol to a drunk to cure his hangover.

 

2)       Does stimulus spending really work? How come it didn’t work for over the past two decades for Japan, whose economy has been anemic at best? FDR’s New Deal didn’t actually pull the US out of the depression which lasted 11 years, It was World War II and the shift to the military economy, which got things going again. Short of starting another world war, what crisis should we be fighting? Climate Change? My bet is on global cooling and not global warming as a greater short term risk, which could push us back into a triple dip recession. What if NASA’s warnings of a solar sun spot cycle minimum and resultant decade or even century-long mini ice age (like we experienced in the 17th century) comes to pass by circa 2020-2022?

3)       How much stimulus financing is enough? Well, nobody really know? The US still has 14 assets bubbles that have yet to burst.

4)       How many rounds of stimulus will we need? Canada thinks it will be out of this recession by mid year 2009. Their logic? Exports are expected to improve by mid year, according to the Bank of Canada. In a synchronous global downturn, who will suddenly decide to buy Canadian exports with renewed enthusiasm? Recovery in 2009?  I seriously doubt it.

5)       What or who do we spend stimulus funding on? Most countries are spending money on traditional infrastructure, but what we forget is that traditional infrastructure does not produce ongoing revenue for the country or for a municipality. Traditional infrastructure such as new roads are a cost item on a national balance sheet, requiring maintenance and money from fuel taxes, unless you have a toll gate or a congestion tax like we see in London, England. A smart road would incorporate piezoelectric sensors that harvest energy by converting vibrations caused by cars and turning it into electricity that could power lights along the roadway. Intelligent sewers could be coupled with algae streams, that would digest the waste and produce useful biofuels. More natural sewage teatment systems have been proposed by biologists and engineers. " First you'd desludge it. Then you'd filter it through nonedible barrier plants and again through a tower of zebra mussels, the best filtering organism out there. After that, the water would be pristine," says Dickson Despommier at Columbia University

6)       What should we be spending stimulus on? Again, governments have a dismal track record of picking new industry winners.

 

7)       What will the recession bottom look like ? We do not know but it will be different from previous recessions / depressions for sure Why? Economist can’t explain the complexity of driving factors to predict the length and depth of the next bottom. Six months ago most of the business community were in denial that a recession was possible and were not considering contingencies or recession-related opportunity scenarios. As the Guardian newspaper is asking this morning about the annual Davos economic love-fest:" Davos is not holding a capitalist show-trial this year. Instead it wants to be the place where the rebuilding of capitalism begins. The event is attempting to slide guiltily into what the organisers call the "post-crisis world" without ever confessing to its role in the crisis....The obvious question is why, if everyone at this meeting is so smart, did almost none of them predict the scale of the crash? The few who did are this year's stars – led by economists Nouriel Roubini and Stephen Roach. And the greatest sinners have stayed away."

 

8)       Who will be the recovery leaders and laggards? We don’t know, despite that stock analysts claim example- Industry x is always a leader or laggard. Not true. Each recession has had a different profile and economists can’t explain why or predict the next one.

 

9)       Will gold and silver be a hedge against future devaluations of currency? Not, if everyone decides to trade in gold back in for cash like we saw in the stock market crash in 2008, when traders suddenly needed cash to cover margin calls.

 

10)   How will the global economy deal with pending strategic material and water shortages that are forecast over the next 15-20 years?  Peak materials ? Wars ? Embargoes? Rationing? Prohibition? Substitution?

 

      "If it can't be reduced, reused, repaired, rebuilt, refurbished, refinished, resold, recycled or composted, then it should be restricted, redesigned or removed from production."
Pete Seeger

 

11)   Are we going back to an economy predicated on unsustainable growth or can we develop a steady state, near zero growth and still be economically healthy? The 2 decade long extended L recovery in Japan could be a forwarning of what the USA faces. - the japanese economic flu.

 

 

 

 

12)   What new economy and technologies  will replace the one that’s currently crumbling before our eyes? The Smart Technology economy?

 

13) Why did Alan Greenspan warn of "irrational exuberance in 1996, but when he became the US Fed Chairman, did nothing to restrain it back into check?

 

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.

Related Recession Posts

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

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

The Bank of Canada released thei recovery forecast  claiming that Canada should be out of a recession by mid year 2009. Many economists see this as too optimistic. After all, the Bank of Canada didn't do a great job of warning me of the start of this recession / depression? Why would they get the timing, pace, depth and scope of the bottom right?

What's usefull about the picture above is that business should design contingency and survival plans for different recession bottom scenarios, just in case they are wrong. What's the downside of betting an a "premature"  false positive bottom for your business? see The Opportunity Clinic; 28 Tactics for managing your Business in a recession Part 6 of 28 What's in your Recession Playbook?

© 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 featuring 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 end? Part 10, The Conformity Trap or Don't count on your economist for advise

In 2000, Prakash Loungani, an economist with the International Monetary Fund, published the results of a survey which looked at the ability of economists to accurately forecast economic downturns in 63 industrialized and developing countries.

 

"The record of failure to predict recessions is virtually unblemished," Loungani concluded.

 

The current global financial crisis - or GFC as it has been tagged - fits this pattern. A mere handful of maverick economists got it right, as did a psychic or two - among the thousands of other psychics...  see story here. 

 

Most economist don't even acknowledge that the recession/ depression bottom, may take different profiles which I've coined based on the alphabet letter shape that it could take. Will the bottom be a  V-shaped bottom? U-shaped bottom? W-shaped bottom? v-W-shaped bottom? J-shaped bottom? L-shaped bottom? extended L-shaped bottom? (I envision at least 7 possible scenarios)

 

Update: See cartoon from March 2009 on right

Why it's so hard to say "yes" when everyone says "no"
Every entrepreneur knows how tough it can be to contradict the conventional wisdom, to zig when everyone else is zagging. A study in the journal Neuron shows why: When an individual holds an opinion that goes against the others in a group, the body sends an "error signal" by firing up a zone known as the "oops area" of the brain while slowing down the so-called "reward area." "Our brains are exquisitely tuned to what other people think about us, aligning our judgments to fit in with the group," a psychiatry professor at Emory University said.

"We show that a deviation from the group opinion is regarded by the brain as a punishment," said Vasily Klucharev, postdoctoral fellow at the F.C. Donders Centre for Cognitive Neuroimaging at Radboud University Nijmegen in the Netherlands and lead author of the study.

This study confirms what I've noticed with many budding entrepreneurs-they fall into what I call the "Conformity Trap". It shows that most people are hardwired "not to be Opportunity seekers or to look for outliers in patterns" It demonstrates why so many people were in denial in Spring and Summer of 2008 that a recession was imminent despite the  overwhelming evidence and will likely miss the recession bottom and resulting opportunities because they will be paralyzed by anxiety, fear and inaction --natural self protecting mechanisms, that we have to overcome. --Walter Derzko

 

The two leading theories of conformity are that people look to the group because they're unsure of what to do, and that people go along with the norm because they are afraid of being different, said Dr. Gregory Berns, professor of psychiatry and behavioral sciences at Emory University School of Medicine in Atlanta, Georgia.

Berns' research, which he describes in the book "Iconoclast: A Neuroscientist Reveals How to Think Differently," found that brain mechanisms associated with fear and anxiety do play a part in situations where a person feels his or her opinion goes against the grain."

 CNN (1/15)

(Hat tip to Gray Hammond)

© 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 featuring 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