- SPECIAL REPORTS
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In the current state of affairs-what some have termed “the worst financial crisis since the Great Depression”-psychology has undoubtedly played a key role. Fear has bred panic, and panic has led to knee-jerk decision making that has had a ripple effect on the global economy. According to Lea Winerman in a recent article in PBS’s “The Online News Hour,” this effect is part of what’s known as “behavioral economics.” Winerman interviewed psychology professor Elke Weber of Columbia University, who said, “If you look at the huge fluctuations in the market we've had in the last week [...] it's vastly larger than the change in actual information.” Notes Winerman, “That's because investors tend to make decisions based on the most recent information they have - not necessarily the most important.”
And what information have we had? Largely doom-and-gloom, depressing-even alarmist-news reports and commentary, for anyone following much of the popular media coverage. But how much of this is true, and how much is merely perception? In the October edition of the National Federation of Independent Business (NFIB) Small Business Economic Trends report, released on Oct. 14, the commentary notes, “If the drum beat of recession, depression, global catastrophe are eliminated from the vocabulary of regulators and the media, some sanity may be restored to expectations.”
As the events have unfolded over the past several weeks, I have often wondered what might happen if everyone just turned off their TV and stayed offline for awhile, long enough to let the dust settle. Or better yet, what if we were suddenly flooded with positive news? Does the theory of a self-fulfilling prophesy also work in reverse?
Some might say that’s what we’ve had for years-hence the bubble of unrealistic expectations. And certainly, we have to play it smart to protect our individual finances and our businesses. I know times are tough, and people are losing their jobs. The threats we face are very real. But focusing on the drop-offs has never helped anyone scale a mountain. If we’re going to assume the worst, shouldn’t we also assume that we have the resources-intelligence, creativity, determination-to get through the situation?
In fact, according to the October NFIB Trends report, many small business owners were feeling better about the prospects for the future prior to last week’s record declines on Wall Street. “The Index of Small Business Optimism rose 1.8 points to 92.9 (1986=100) [in September], continuing one of the longest strings of recession-level readings in the history of the survey (started in 1973), but headed up for the second month in a row in spite of all the hoopla on Wall Street and Washington, D.C.,” the report notes. Additionally, 14 percent of respondents said that they believed general business conditions would be better in six months-which doesn’t sound like much, until you compare it to the -22 percent figure in January of this year. Indeed, every month in 2008 except August (+4 percent) and September had negative readings. That makes the September figure look even more positive.
Everyone wants to know what the future will bring, but no one has a crystal ball. Maybe the global government bailouts will work; maybe they won’t. Maybe the November elections will hold the solutions to all our problems, or maybe not. I, for one, am tired of all the talk about the crisis in the world at large. Let’s focus instead on short-term and long-term strategies each of us can put into play to keep our businesses viable and position them for even greater success once we make it through this challenge.
What about you? Are you taking advantage of a slow business environment to focus on education? Are you adding value to your services by branching into GIS or other related capabilities? Are you becoming more creative in your marketing efforts? E-mail your strategies to me at email@example.com or share them below.