Adjust your sails

Our Economy’s Performance is Perfect

Lots of folks are still complaining. The growth is too slow. The growth is uneven. The jobs created do not pay enough. There are too many temporary jobs. Personally, I believe the folks spouting this stuff haven’t figured out that these are the old model measurements which no longer apply, and that the data show our economy is actually doing quite well. I put it this way: Our economy’s performance is perfect.

What I mean by that is simply this. Given that we are now in a very complex interdependent (not just interconnected) global economy, given that the global population is putting pressure on resources, given that there are many strains in our man-made financial institutions and, given that human nature appears to be more inclined to instant gratification, our economy is doing exactly what it should do. If you believe in free markets and capitalism, then you can’t complain about the way that our economy is performing. The next step is the dicey one. If you don’t like the way it’s performing, even though it is performing perfectly for the conditions and environment, then what do you choose to do to achieve a different result?

Stop trying to create a better past

I despair that so many conversations around this topic devolve into a discussion of how things “should have been.” From recent elections, to recent legislation, to the sins of past spending and on and on. Pardon my saying so, but that is not at all helpful. History only provides glancing insights. Whatever lessons might lurk there have to be substantially modified to account for the new environment. We are never going to return to the “good old days” (whatever that means to you) again. To indulge in the “trying to create a better past” game, we are essentially trying to somehow re-direct the winds of change. That’s not going to happen.

What’s so? –> So what? –> Now what?

US GDPWhat’s so? Frequently there is a challenge in this simple formula. Getting agreement at each stage is not all that easy. When it comes to our economy, getting people to agree on what’s so is very difficult. Here are a few things I believe are “so.” The U.S. GDP is fully recovered from the 2008 recession and is on the same growth rate as prior years (the grey bars are recessions.) Nonfarm payroll employment continues to increase. The U.S. Debt as a percent of GDP is also moving in the right direction; and you notice it is no longer newsworthy even though it is still a long term worry. Contingent workers are now a structural and growing part of our business model. Mainly this is being driven by a need for flexibility in responding to market changes. We’re doing all this with an increase in productivity (meaning fewer FTEs) than before the recession.

So what? I’m sure you can find your own favorite indicator to either suggest things are going okay or to “hell in a hand-basket.” Here’s one that bothers me: The American Dream of upward mobility has stalled. We are no longer the best at providing our citizens opportunity to climb the income ladder. The question is what does this all mean? I’m suggesting that it means that the global economy is shaking things out to allow for the increase in the standard of living that the global population is demanding. That necessarily means (you do the math!) that those who were on the top of things will very likely have a stagnant standard of living at best. It also means that the way of doing business (the business model) must change. To try and force things back to the way they were is to try and redirect the winds of change. Knock yourself out! What I’m observing is that those experienced sailors (to continue the metaphor) at the helm of small businesses have tucked a reef in the main sail and set a new course. They are doing just fine with their ship back on an even keel despite the heavy winds.

Now what? The storm isn’t over if we believe our “weather forecasters.” The folks over at The Institute for Trend Research, for example, are saying we are heading into rough waters in 2014. Not a full fledged storm such as we’ve just come through in 2008 and 2009, but a slowing down again. Once through that, 2015, 16 and 17 should be reasonable sailing again. This means, to me, that we need to continue to cut overhead, not add it (don’t hire FTE’s unless you absolutely have to in order to meet demand.) It means making sure the ship is light, tight and well tuned, not overpowered. Given that our destination hasn’t changed (prosperity and upward mobility for our citizens,) and that the wind has changed direction (global economic activity,) then we have to alter our course and re-set our sails (meaning change our business models, processes and procedures.) We may actually find this to be a better point of sail.

There is much work to be done, and, at many levels we are not getting it done. Much energy is being put into trying to change the wind, pointing fingers at crew-mates and blaming each other for not understanding where to go. Here are some things that I know: there are some fundamentals to making sure we are running a good business. We should get back to those fundamentals as best as we possibly can. There are times when a business has run its course and either needs to change drastically or even shut down. Perhaps something new can be built in its place. Change is relentless and is coming at us faster than ever; doing our best to understand it and adjust will be what allows us to survive – evolution is the survival of the most adaptable. We need to put our egos in our back pockets and be willing to learn from others on the global scene. I’ve stated that our economy is performing perfectly for the environment we’re in, I did not say it was a perfect economy. What can we learn from our North American Neighbors? How about Japan? How about China? The lessons, as always, can be what to do and what not to do. There can be pieces of other economies that we can apply as best practice if we are not too proud to learn.