Monday, December 8, 2008
I hate to say it, but I know. I KNOW. I grew up in Buffalo during the 1970s. One of my fondest memories of my father was our discussions of the decline of the oil industry, his employer (remember Texaco?). He was an award winning salesperson in the early 1960s (I still remember the slogans: Under the Gun in 61, Out in the Blue in 62) and our home collected his trophies. He was a success.
But that was not to last. Texaco closed the Buffalo regional office where he was based, selling petroleum products to a shrinking local industrial base. His territory kept getting bigger, sometimes taking him to not-nearby Pennsylvania.
Dad was laid off in the early 1970s. I was in college at the time. I had a full scholarship, for the debate team. I worked every summer to pay my dining expenses, so all he had to pay for was my dorm and incidentals. So I was spared my life falling apart when his did.
Fortunately, he was quickly hired by a local speciality grease manufacturer, where he worked until his death. But he never really got over the demise of Texaco. He always had liked working at a big corporation; his dad drove a bread truck, so he had advanced himself to the next rung on the ladder. His death came from a heart attack; by the time I got the call and came home from 500 miles away, on Halloween night in 1981, he was already dead.
I think of my dad now, because what he went through is a lot of what many of us will be going through...not just the big losses of houses and savings, but the more subtle losses, the losses of a sense of your place in life. A whole generation is losing the American story of upward mobility.
I see that loss echoed it in the calls for a bailout, the emotion that government needs to "do something" to save these jobs. The emotion as again, a way of life is torn up by forces way out of the average person's control, even out of Wall Street's control.
One of the hardest things for my dad was to see what was going on around him and feel the victim of it. He felt that nothing could be done to restart Buffalo's economy. He was an ambitious homebody, a family man and loyal corporate soldier.
I am writing my book for my dad, in gratitude, and for the dads and moms who will be facing some of the difficulties that we had growing up.
Sadly, my dad really never survived the loss of that job. But in truth, it wasn't the job that killed him, it was something more insidious.
A few months before he died, he told my mother, "I've been fooling people my whole life." For my dad, succeeding in business, even in the limited way he did, propped up his deep sense that he didn't belong. Tell me you don't know people like that, who have gifts and just don't feel they deserve to live into who they really are. Tell me you aren't one.
In my view, my dad deserved to be at the table of plenty. He had the skills and work ethic, but he never had faith in himself. Like many men, he drank, not problematically, but enough to ease himself into home after a day at work.
Dad never survived his personal recession.
My dad never trusted in his bones that he could "Bring forth that which is within him." He never knew that "what is within him would save him." He measured himself by some standard that I never fully understood, and he always came up short in his own eyes. I don't know this for a fact, but I believe he died feeling like a failure.
Throughout my life, I have been trying to figure out a different calculus for my life. I'm writing a book out of these blog posts, about how to bring forth what is within you and be at peace with the demands of an unstable economy. What was a personal project has now become a deeply felt mission. There is a lot of pain coming -- pain that I am very familiar with, and in fact feeling now -- and I want to help Americans to redefine their lives in such a way that they are not victims, like my dad was, when the economy turns against you.
The last time I saw my dad was in Florida, where he and my mom spent every winter. They rented a small house near Orlando, which was where autoworkers and others from the Rust Belt clustered. He was an old man at 71. We talked, as we always had, about politics in Buffalo, cars, and other things. We spent time with their friends from Buffalo. I remember thinking that this man I had so many complex feelings had become "harmless." I think he had found some peace from his demons at long last, and had learned to relax and enjoy his family and friends. He had been retired for six months. Six months later, he was dead.
If my book can help one person to see him or herself more deeply, to tap into his or her own being for answers, rather than crash and burn at the loss of a 401(k), or a job, or a house, then you can be sure that I didn't do it alone. I don;t mean this in any superficial, feminine, new age way. I mean it in the most hard-hitting, war-like, practical, life-saving way.
After all these years, maybe I've found a way to pay my dad back for his sacrifices. He is in every word I write.
Her advice is rooted in the sandy soil of many years of easy times, times that have come to an abrupt and surprising end. There is more than a little economic illiteracy underlying her assumptions. Yet, it is the approach most Americans are comfortable with: if I look ahead and stay positive, things will stay essentially the same, because I am a successful person.
But that is not what a subset of Americans I call "super-copers" does in a crisis. Research over many decades shows that decisive, resilient people, be they CEOs or widows, FACE UP TO threats and crisis, go through (and get through) a phase of panic and depression,and shore up their situation against the threat. THEN AND ONLY THEN do they look to the future, and what they do about it is different too.
But before we get to that, I need to debunk the pervasive view that Memechella's article passes off as sound advice.
I want you to not only stay afloat in the difficult year ahead, I want you to thrive. So let me help you recession-proof yourself by helping you replace soft thoughts such as hers with robust, resilient, recession-proof thinking.
ADVICE: Don't read news coverage of the economy.
Everywhere you turn you hear that we are either heading into a recession, we are already in a recession or we are on the brink of a depression. It is enough to make you crazy. While it is true that we are experiencing financial challenges in our world today, it is also true that the constant talk about financial ruin is helping to create those very conditions.WRONG! Make sure you understand what is going on, and once you have formed your opinion, then control your daily news diet or eliminate it. To just turn away because "it makes you crazy" prizes mental confort over honesty.
ADVICE: Don't let fear stop you from spending.
When people only hear about how bad the economy is, that layoffs are imminent, that we are going to have money problems for months, if not years, they become fearful of spending money. When people don’t spend money, the economy worsens. It becomes a self-fulfilling prophecy.
WRONG! Confidence and trust are essential elements of any economic system. Consumers lack confidence in their job security, their investments, their housing values. Cutting back spending is prudent advice. This recession is caused by excessive consumer debt-fueled spending that is no longer sustainable. Retrenching consumption is part of the solution, and it will take a recession to achieve it.
ADVICE: Don't worry because you will be one of the lucky ones.
Whatever success you are currently enjoying is yours because of who you are. It is not an accident....Just because the economic conditions are changing, that does not mean that your success is about to be pulled out from under you. You have a consciousness of success and that will help you to find success in the evolving economic climate.SHALLOW: What if you are not? Are you willing to assume once a winner, always a winner? The economy is not growing. Those who were successful for the 20 years when growth was easy are not necessarily of the temperament to succeed in a recession. (That is the point of this whole article, really!). Some investment advisers do better in bull markets, others in bear markets. Not many do well in both, because each kind of success requires a different kind of thinking. Since this will be a deep and long recession, wouldn't you like to learn more about how those who prosper in a recession do it?
ADVICE: Think it and it will be so.
Continually hold a picture of yourself being successful in your mind. See others offering you wonderful opportunities for which you are abundantly rewarded. Does this seem like a fantasy? It isn’t. It is a very powerful success practice....By continuing to hold a success picture in your mind, you will unconsciously be sending out signals to others that you are a success. Your continued success is sure to follow.PUH-LEEZ! It's hard to know where to start on this one. First, success in business always starts when you provide value to someone else. The resilient thinker asks: how can I increase my value so that when I am one of 100 applicants (instead of just one of, say 10) I will be able to bring the most value. Second, as you notice with all of these tips, they are completely self-centered, about propping up your own thinking about yourself. Resilient people are made of sturdier stuff; they act and connect.
ADVICE: Control your thoughts
I have learned from my own experience and the experience of other successful people that when we take control of our minds, we take control of our destinies.YEAH, AND THEN? Of course we have to control our thoughts, not take counsel of our fears. But that is just the beginning.
This recession is full of opportunities for growth and joy. They won't be the same opportunities that we had in the last 20 years, which were amply funded by a debt-inflated economy.
Everyone to a person will face a decline in their financial well-being. Some of us, like this writer, are so wedded to identifying as "successful" that we may cling to appearances rather than accept our losses with grace and move on to the next part of life.
But the resilient thinker -- whoa, she is off for a wonderful adventure that depends more on her imagination and guts and less on her bank account. Ah, but her story is another blog post away.
Friday, December 5, 2008
People may not like it but the standard of living in the US is likely to drop for the first time in history.
People need to be prepared for this and the loss of a job [and, I might add, the failure of a small business.]
Yes, this is "doom and gloom" but it is also reality.
It is time for balance sheet repair at every level: personal, corporate, city, state, national.
It will be a time of tough choices.
Thursday, December 4, 2008
25 THINGS TO DO TO CROWD OUT PANIC AND OPEN UP RESILIENT THINKING
1. Take a deep breath. Then another.
2. Walk outside. Without a coat, just go out and walk around. Smell the air, feel the weather.
3. Make a list of 5 favorite things that you currently have.
4. Make a list of 5 thing you have done that you enjoyed doing; does remembering them make you smile?
5. Write down your favorite color. Wherever you are, find 5 things that are that color and write them down. Describe the actual shade or tint they are in.
6. Look around your house and rearrange one room or nook by bringing in something different or just rearranging what is there - 10 minute time limit.
7. Make a list of 5 people you haven't seen in at least a year. Find their current contact information and send each an e-mail.
8. Who is someone in your profession or area of study that you always wanted to meet? Find their website or blog, get their contact information, and tell them the thing you most admire or appreciate about their work and how it has helped you.
9. Make a list of 5 things you always wanted to do that you keep putting off.
10. Write down one small thing you do exceptionally well with little strain, either at home, in your personal life, or at work. Answer these questions in one sentence each: 1. How did you get the activity rolling? What did you do to keep it rolling? What did you do to overcome obstacles you encountered? How did you bring it to a successful conclusion?
10a. If you liked that, do it a few more times. Look over your answers. What do they tell you about how you are most effective in getting things done?
11. Clean out your car. Wash and wax it yourself. Polish the seats if leather. Vaccuum it out. Treat the wheels and rims. Get rid of all the junk in the trunk.
12. Get a library card.
13. Take out a book that is on a subject related to #3, #4 or #8 above.
14. While you are there, take out a book on feng shui, the art of alignment and placement. Open it at random and implement something from those pages when you go home.
15. Get a small notebook you can carry with you and a pen. Also get a voice recorder (Sansa is a good one). Start blurting out those random thoughts that we all have. Get them out into the fresh air so they can develop.
16. Buy 2 each of three different kinds of apples. Find a simple apple pie recipe on allrecipes.com. Cut up the apples and put them into a premade crust and bake. While you are enjoying the smell, retain a few slices of each kind of apple and write a review of them as if you were a wine critic. Now come up with a name for your unique apple pie.
17. Make a list 3 things you like to do at work. Not jobs, but activities. What is really fun for you? When do you feel like you are really using what you are all about?
18. Find a wooded area where you can take a walk. Take your voice recorder and your notebook and pen. No agenda. Take a 30 minute walk. Write down anything that you think about.
19. Write down your ideal day. From waking up to having breakfast, to getting into the swing of the day, to eating dinner and activities after dinner, what would be a great day for you?
20. Call up an old friend just for the heck of it to see how he or she is doing.
21. Take that apple pie (or something else) to a neighbor or friend as a surprise. Thank them for something they have done for you.
22. Plan at least 30 minutes to yourself, where you will sit quietly. If you feel the urge to get up and check e-mail or twitter, just sit back down. Have your notebook and recorder at hand.
23. Put up a bulletin board somewhere where you can stick up things that strike you as pretty or meaningful.
24. Make three bins to put your notes in from your notebook and (transcribed from) your recorder: rants/ravings, ideas for work life, ideas for personal life.
25. Make a promise to yourself to keep a copy of this list with you and to PULL IT OUT and do something on it whenever you start to panic. .
If you start to panic again, rinse and repeat. You always have this list to keep your feet on the ground.
Tuesday, December 2, 2008
“We have nothing to fear but fear itself. “
We could use a little of Franklin Delano Roosevelt’s Depression-era grit right now.
This so-called recession is actually a systemic crisis that covers the entire world economy. We will all be deeply affected, if not today, then next year or the year after. All signs are that things will get worse – probably much worse – before they start to get better. No debating: change has come.
We’ve had a pretty long run of peace and prosperity, so long that we have taken them as reality itself. Most of our personal coping strategies were honed in this favorable environment. Ironically, many of us learned to cope with stress by spending the money that seemed to be plentiful and unending.
So how do we cope now? The problems are tougher, and we don’t have the money we once did to make pain go away.
Fear makes people do strange things – go on spending sprees, take impulsive action to stem losses (like selling stock abruptly), drink to excess, rail against the “stupidity” of our leaders, get absorbed in blogs and twitter to the point of distraction [my personal favorite] and so forth.
There is a strain of denial in all of these strategies; denial that something has been lost, and that it isn’t coming back. Scrape back that denial, and our old enemy, cold hard fear, is not far from the surface, with its cold fingers tight around our throats. Many of us are literally “frozen in fear.”
How can we best handle ourselves as this economic crisis unfolds?
We can’t bring back the past, but we can create the future. I’ve found a strategy that works, regardless of the nature of the loss, because it is the deepest possible antidote to fear. It is soft, tender even, so it is probably the last thing a fearful person would think of.
It worked for me when I was diagnosed with breast cancer early in 2008, when 9/11 crashed the foundation and charity world, source of my clients, when I lost everyone close to me within a few weeks in 2003, and now as I cope with my fear about this economy and what it means to me, my new husband, our family, and my friends.
It starts with a basic principle of human nature: If you bring forth what is within you, what is within you will save you. If you fail to do so, what is within you will destroy you.
“What is within you” is what you will use to create your own future. The key question to ask is: What opportunities are there for me to become stronger, more true to who I really am, in this crisis?
I doubt very many of us will become homeless or lack for meals. I expect that many of us will see significantly worsened financial situations now and perhaps for the rest of our lives. I am suggesting that this question, what is within me that I now have the opportunity to bring forth, is the foundation for your own effective coping.
I don’t mean this trivially. I don’t mean trading dinners out for strolls in the woods if that is not your thing. I don’t mean rediscovering the joys of homemade meals and crafts (these are tedium to many, me included).
I do mean a rigorous, continuous, and honest look at who you are, what you really want, and how you can be even more of who you really are, as this crisis unfolds. And I mean applying that deepening knowledge on a moment to moment basis as you make decisions. You won’t be chasing dollars quite so hard in the years ahead; what else is there to being you in the world?
Such a strategy gives you two advantages:
First, it makes it far more likely that the decisions you make will result in personally satisfying outcomes (e.g., happiness) for you. You will likely enjoy watching your choices weave into something new.
Second, it gets you used to finding your own rewards, and insulates you from being manipulated by advertising- generated rewards and separated too readily from your money. There will be less money to go around, that is one certainty. There already is.
I’ve done this, focused on bringing out what is within me when a crisis hits, and it works.
When, through death and desertion, I lost the 5 closest people to me within a month, what I found within me was a deep desire to connect, to relate, to not be alone in the world. This was new – I was a single woman who liked being single. But something changed. I am now married with 4 step children and part of a large extended family.
When I lost my job at a dot-org that lost its funding after 9/11, and the DC economy tanked, I reluctantly took a low-paying job at an SBA-funded Women's Business Center. That turned out to be the start of a new career in small business development that has brought me more intrinsic rewards, friendships, and sense of purpose than any of the work I had done before. I felt I was tapping into something deep.
More recently, I enrolled in a mentoring program to write and speak about small business. Shortly after it started, I was diagnosed with breast cancer. Over the course of treatment (now completed), I stayed in the program as best I could.
What happened was that I began to understand my interest in small business more deeply. It stemmed from my upbringing in the Rust Belt, in a state of constant recession. I left to escape the hopelessness that a weak economy creates. In the process, I learned that life -- and making money -- had far more possibilities than the fear-soaked culture I grew up in ever imagined.
My book – and this article is part of it – will now be much deeper and I hope more useful. There are hard times and real losses ahead, for the country, for business, and for many individuals. I hope I can help people mourn the passing of one stage of our national and personal economic journey, and get on with creating the next one.
What is in you that is ready to come to the fore? I’m all ears.
Thursday, November 20, 2008
HOWEVER -- there is appropriate economic relief that the Federal government can give Detroit, and that is relief from the burden of health insurance for ALL of its retirees. GM recently cut what the benefits for its salaried retirees, saving the company more than $1.5 billion. But that is pocket change. As Nick Bunkley wrote in The New York Times on November 8,
In fact, paying the cost of hospital stays, surgeries and expensive drugs for retirees, a group now larger than G.M.’s active work force, is a major reason the company’s financial woes are so great. G.M. says it spent $4.6 billion in 2007 on health care for its one million employees and retirees and their dependents.
Two-thirds of GM's insurance costs go to cover retirees, most of them untouchable because union contracts protect their benefit amounts. So -- moving those union retirees into the Federal health care system, with a declining co-pay from GM -- could save Detroit billions.
Of course, this would mean that the Big Three would have to declare bankruptcy so that the union contracts could be loosened and this provision made possible.
I know this roils the Democrats traditional "joined at the hip" relationship to big labor. But this is a national crisis - a time for leadership that looks beyond small-minded politics to the larger issues at play.
And this is true fairness. Detroit is being crushed by the burden of our failure to enact meaningful health care reform.
I know how good those retiree benefits are. I managed my mother's care after her GM salaried retiree husband died. She paid about $15 a month for insurance while I was paying about $400 as a self-employed adult.
In today's economy, letting an entire industry bleed to death to preserve "gold-plated" benefits just doesn't make economic sense. Allowing retirees to have a soft landing in the Federal health insurance system means this solution makes political sense.
Wednesday, October 15, 2008
Poverty, to me, isn't about having few material possessions. It is about not being able to live well in this world. It is about being left on the sidelines of life.
The technical term "marginalization" means essentially the same thing, but I like the more visual sports metaphor. Picture some people always sit out the game while others have a great time playing.
Everyone is needed in this game of life. So here is my manifesto for Blog Action Day against Poverty:
1. Every human being has a unique genius inside them. We are put here on this earth to bring forth that which makes us unique; to give to the world what only we can give. Our genetic blueprint is utterly unique; you only have one chance to bring forth that uniqueness that is you and you alone.
2. Poverty is what stops us from bringing forth our unique contribution to the world. Poverty is rarely just one thing. It is the cluster of things that keep our potential locked inside. I believe there are three kinds of poverty:
a. Material poverty. The lack of food, clothing, shelter, safety, communications, all of those external things.
b. Relationship poverty. The lack of the kinds of relationships that enable us to take action to lead a good life. Someone in the developing world may lack the connections to sell their crafts to anyone but foot-travelers. Your neighbor's child may lack for kind words when she needs them. Villages can be consumed by violence and the enmity and distrust that it breeds.
c. Inner poverty. Anyone can be poor inside who cannot see the love, joy, wonder and potential for themselves and others in life. People often settle for what is right in front of them because dreaming hurts too much.
3. The best way to end poverty is to help people go after what they themselves want, whether it is an individual, a village, a family.
Uniting people with their deepest dreams can cure inner poverty.
Bringing people together to work toward a common goal can cure relational poverty.
And when people believe in themselves and have support for their actions, their material poverty cannot help but lessen. This is the wonder of capitalism.
And the true glory of being human on this earth will flourish in more and more places. People who thought of themselves as poor, on the sidelines of life, are suddenly right smack in the middle of the best life has to offer.
Anyone can begin to end poverty at any moment....including one's own.
Friday, October 10, 2008
I completely disagree.
Here is the reality: We ARE ALL participating in this recession because we are all alive and part of this world and economy we live in.
Those who do well in a crisis FACE reality head-on. It is common sense. It is also what responsible research has found.
Let me say it again: there "ain't any stinkin' positive thinkin'" anywhere to be found when you look at research on how super-resilient people handle crises.
Based on Kathryn Cramer, Ph.D.'s research on super-resilient people
Stage 1 has two steps that should be done simultaneously: FIRST: assess honestly how the economic crisis affects you -- face facts -- and start to brainstorm about what you need to do to protect yourself. DON'T RUSH INTO ACTION....but just come up with ideas. SECOND: Control any panic reactions you are having (remember that "we have nothing to fear but fear itself.")
When panic reactions are under control -- then you can look at your defensive ideas and start to implement them, stage 2. Failure to take comprehensive defensive early means the crisis can still drag you down. And you can start brainstorming about what you might do now that your old plans are out the window.
Once you have implemented your protective measures, you can start in stage 3 to make decisions about what opportunities or actions would be in your best interest to move on in life.
In stage 4 you start implementing your decisions and tracking your progress.
Positive thinking about real estate values and stock prices is a lot of what got us in this crisis. Realism is what is going to get us out of it.
For detailed techniques for each stage and copious research citations, see the book Staying on Top When Your World Turns Upside Down by Katherine Cramer, Ph.D., available through Amazon.
Thursday, October 9, 2008
The first step must be to accurately assess the risks and protect yourself. Only then can you start creating your response to your new situation. What I want to get across in this post is that the likelihood is that the entire economy will contract over the next few years. Now is the time to define your safe harbor in the storm that is coming...and start moving toward it.
Forecasts I've read recently call for a severe two-year recession AND a dial back of the Dow to 7000. Since most forecasters missed the financial meltdown, I take these economic bears very seriously.
What follows below is a post describing a 12-step descent into financial hell in the American economy. Interesting, it was written in February of this year. The author, Professor Nouriel Roubini of NYU's Stern School of Business, is the only analyst to have been bearish enough to be remotely right.
This full post is in the subscription-only section of his blog, but I repost it here. If you will slowly read through all the steps, I think you will begin to get a fuller picture of the severity of the situation we are in. And only then can you start devising realistic strategies for your own business and personal well-being.
(Notes are mine.)
First, this is the worst housing recession in US history and there is no sign it will bottom out any time soon. (Note: Check!)
Second, losses for the financial system from the subprime disaster are now estimated to be as high as $250 to $300 billion. (Note: Check!)
Third, the recession will lead - as it is already doing - to a sharp increase in defaults on other forms of unsecured consumer debt: credit cards, auto loans, student loans. (Note: starting....)
Seventh, the banks losses on their portfolio of leveraged loans are already large and growing. The ability of financial institutions to syndicate and securitize their leveraged loans - a good chunk of which were issued to finance very risky and reckless LBOs - is now at serious ri)sk. (Note: this is what the bailout/rescue is dealing with now.)
Eighth, once a severe recession is underway a massive wave of corporate defaults will take place. (Note: many of these are our clients.)
Ninth, the "shadow banking system" or more precisely the "shadow financial system" (as it is composed by non-bank financial institutions) will soon get into serious trouble. This shadow financial system is composed of financial institutions that - like banks - borrow short and in liquid forms and lend or invest long in more illiquid assets. (Note: the shadow banking system has essentially disappeared).
Tenth, stock markets in the US and abroad will start pricing a severe US recession (Note: recent sharp drops in the market.)
Eleventh, the worsening credit crunch will lead to a dry-up of liquidity in a variety of financial markets, including otherwise very liquid derivatives markets. (Note: further slowing corporate growth)
Twelfth, a vicious circle of losses, capital reduction, credit contraction, forced liquidation and fire sales of assets at below fundamental prices will ensue leading to a cascading and mounting cycle of losses and further credit contraction. (Note: how a credit based recession that starts in the financial sector spreads to Main Street.)
If you have stuck with it this far -- please ask questions and make comments! I'd like to have a discussion that starts with a sober look at what is really going on.
Thursday, October 2, 2008
Read it for some real wisdom about our current crisis: http://www.edelman.com/speak_up/blog/archives/2008/09/failure_to_comm.html
Getting tagged with the term "bailout" is one of the failings he lists.
How about "economic stabilization." Let's hope that is coming....
Unlike all of the other financial debacles you cite, this one is global and its attendant risks are unprecedented. At least 10 other countries have intervened to prop up illiquid banks. This one is more like the run-up to the 1930s Depression that only ended because of WWII. In other words, it got so bad that no one could put the economy back together again. Symbolic and real action by the US is essential to limit the scope of the current crisis and prevent it from getting into that zone where a functioning financial system can't be put back together.
I find George Soros' concept of reflexivity, and his analysis of the generic features of booms and busts, very instructive and very compatible with you comments about risk. The flaw in the system is a human one, in which higher and higher levels of risk become socialized as normal. It's not just the CRA of the 1970s....it's the young homebuyers who felt it was normal to get a interest only mortgage! Or to flip a house for $100K in two years! This is much as it was in the 1920s....income and equity became a lower and lower share of one's financial story, because everyone thought everything would go up and up forever. I would add to Soros's analysis that the risk models are linear and institition-specific, whereas in a globally interconnected economy, the risk issues don;t just sit there on your spreadsheet -- they interact with each other in new ways. Risk doesn;t just increasse in a linear fashion -- it rises and them falls off the cliff into breakdown. That is where we are now.
And on the mortgage side, many banks sold off those sub-prime loans as mortgage-backed securities in tranches reflecting risk. That is the move that has made this a global crisis. Pension funds in Finland bought securities backed by interest only and CRA mandated mortgages! Can you imagine the long-term damage to our nation in foreign affairs, to our global leadership, and to our future economic prospects if we stiffed those countries left and right?
In other words, we can cast blame and rightly so, but everyday Americans will pay a much higher price if there is no action to stabilize the economy.
The idea I favored (see a previous e-mail) would have acquired assets from troubled institutions by issuing preferred stock in a government owned "stabilization corporation." That corporation would be seeded with $100B of taxpayer money (not $700B). The net effect is that the banks would have owned the bailout, not the government owning the banks. If asset sales went well, the stockholders would make money....if not, the would not make money. The bad loans were off their books, crisis solved, but not on the taxpayers nickel.
Unfortunately, that excellent idea never got the time of day on the Hill. The bailout is what it is, and I am glad it appears to move forward, however flawed.
I am blogging on this subject at the address below. Like you, Colleen, something in me has changed deeply over this crisis. I grew up in the Rust Belt and know how horrendous it is to have no opportunity because the fundamentals of the economy turn against you. I don't want to see that happen in this country, which has been the source of much that is good in this world -- including economic growth and financial strength.
That is why I hold my nose and support the bailout as the best of two lousy choices.
Wednesday, October 1, 2008
The same phenomenon is at work in this economic bust.
Let's go back to post-WWII when the modern S&L was born. Savings and Loans were created to finance the building of the suburbs by making mortgage loans and paying interest on savings accounts from those earnings. Sounds like a low-risk business. BUT a few changes introduced a gradual risk-creep that just kept going.....
Obviously the S&L concept works well with stable interest rates, so the banks can manage a nice profit from the spread between what they take in on loans and what they pay out on savings accounts.
But in the globally interconnected economy, with interest rates fluctuating, such a model is in trouble. S&Ls got locked in to low income from low rate mortgages while needing to pay out higher savings rates. This led them to search for higher returns from their investment -- inviting both fraud and financial innovation.
In two words, Risk Creep.
Adam Smith saw "equilibrium" as an achievable state in which those activities were in balance...supply was available that equaled demand. On a small scale, in early industrializing England, that may have been true for a few years, at the birth of the industrial economy.
But since then, the "levers" have become many and their relationships tangled and complex. It is a struggle to describe how the economy works in such terms that a lay person (heck, that competing economists) can agree on. And the relative importance of those levers shifts as the underlying economy shifts.
But make no mistake -- the economy is a human creation. It is not a "thing" out there. George Soros calls the human element "reflexivity." In complex and often hard to parse prose, Soros lays a considerable amount of blame for booms and busts, not on impersonal economic forces, but on .... people.
It is NOT a given. It is an ACCOMPLISHMENT.
A soundly functioning economy is the product of a host of actions: from business owners, workers, government regulators, banks and other lending institutions, and the "back office" organizations that keep everything humming along.
And at the core of this cobbled together structure called capitalism is one word: TRUST!
At the consumer level: here's an example of trust in the financial system. If you hit my car, I don't try to steal yours to make up for my loss. I TRUST that GEICO my insurer will handle my claim and I will be made whole.
The same is true at more esoteric levels of the financial system. In the case of AIG -- if I held mortgage backed securities, and those securities went down in value, I have to keep more money in my company to balance that out.
And if those securities become valueless -- I know that my insurance premiums I pay to AIG will cover my losses and prevent my business from going out of bsuiness. Without that security, well, it becomes too risky for me to lend; it's more lucrative to just sit on my cash while everyone else who lends goes under.
Would you risk driving a car you if woke up one day and there was no car insurance? Probably not. Could you get to your job? Buy groceries? Go to the gym? And if the government didn't intervene, don't you think the economy would tumble? If consumers can't buy goods, stores will lose money, many will close, jobs will be lost.
Like with Humpty-Dumpty -- all the kings horses and all the king's men wouldn't be able to put the economy back together again. The trust -- and the infrastructure that generated the trust -- will be gone.
Same is true in the global economy right now: don't take this economy for granted if you aren't willing to invest in the infrastructure that makes it successful.
Tuesday, September 30, 2008
FDR spoke to people's hearts in the Depression.before he advocated policy recommendations. What do we STILL recall from his fireside chats: "We have nothing to fear but fear itself." He united the nation with his inner strength.
Under the anger on Main Street is fear and confusion...fear about "what will happen to me" and confusion about why this all is happening. The candidate who speaks courageously to this fear will own this issue.
This FIRESIDE CHAT format fits McCain's strengths. It takes his war hero resilience and spiritual stature and applies it to the economy.
These talks should be short. One topic per segment. A series of at least 10, each covering an aspect of the situation. ((I am actually working on such a list, I'm starting an internet radio show to explore this crisis. It's a great idea but MUCH MORE POWERFUL IF MCCAIN DOES IT.))
For each topic, he should picture in his mind an actual person who will lose his job, life savings, and way of life. Today's talk missed hitting voters right in the gut. He can do it and he must do it to win.
If this is of interest, I give it away freely. This is the most important crisis of my lifetime and if I can help in any way, I am honored to do so.
I will write my heart out for McCain -- that is what I do. I'm a Rust Belt survivor who never wants others to go through the economic pain that comes with business falling apart all around us.
These angry folks opposing the bailout just haven't a clue. And those who think the statist, leftist Obama knows about economic leadership...see the next post.
Last week, Obama economic adviser Jason Furman Washington Posttold the Washington Post: "This [bailout] is a major fiscal problem in the short run, but it doesn't alter the long-term fiscal picture."Furman comes across as tone deaf to the larger economic concerns of voters, focusing on the fact that the government won't go broke doing the bailout. I don't think anyone thinks it will. It's not the FISCAL (government) problem that the candidates need to address.....
it's getting across to the American people that this bailout isn;t going to bankrupt them through higher taxes. That this bailout is about restoring the financial system that we all depend on everyday. That not doing the bailout makes about as much sense as stopping running the subway in New York...the cure is a lot worse than the disease.
The Democratic Congress, and Democratic economists such as Furman just don't seem to get it.
The context of Furman's remarks is this remark from Obama:
"After this immediate problem, we've got the long-term fundamentals that will really make sure this economy grows."
Obama mocked McCain for saying the same thing in January of this year. His top economic advisers agree with McCain. And his political advisers seem to be letting the candidate pick up McCain's message.
Friday, September 26, 2008
His insight: Instead of paying cash to those banks in exchange for their bad investments -- the government would take them off the books of those banks by ISSUING PREFERRED SHARES IN A NEW GOVERNMENT-OWNED RESCUE CORPORATION.
The government would capitalize that corporation with $100 billion in cash (taxpayer funds). It would buy and hold troubled securities until the market restabilized. It would then sell the securities those banks holding them would reap the gains. The government could go ahead and redeem (buy back) the shares at any time. Banks could count the shares as part of the capital they need to hold. Credit crunch solved.
I quote :
The beauty of this arrangement is that, rather than protecting taaxpayers by having the government take an ownership stake in hundreds privately owned banks, it would be the banks that would own a stake of the government's rescue vehicle. The government would suffer the first $100 billion in losses from buying and selling the asset-backed securities, but any further losses would be borne by the other shareholders.And lest this become fodder for high stakes debate, Pearlstein reminds us of what is at stake:
...all it would take is one more hit to trigger the modern-day equivalent of a nationwide bank run. Financial institutions would fail, part of your savings would be wiped out, jobs would be lost, and a lot of economic activity would grind to a halt. Such a debacle would cost us a lot more than $700 billion.
Who is going to step up and save us from that scenario -- George Bush? Harry Reid? Nancy Pelosi? John McCain? BarackObama? Barney Frank (grrrr....more on him later)? The Democratic-controlled House and Senate? The dissident Republicans?
Pearlstein's plan is pure genius and it gets around the tough politcal obstaclesd that have the nation tied in knots. Let's spread the word -- this plan is the best idea I have seen to put the risk of calamity far behind us.
Please (a) comment, (b) forward this blog post to your elected representatives, (c) forward it to your friends, and (d) tweet it if you are on Twitter, and (e) use your other social networking platforms as well. I'm on it right now - please join me!
WHEN THE POST PUBLISHES HIS COLUMN TO WASHINGTONPOST.COM....I will add the link.
Thursday, September 25, 2008
I'll tell you what such comments are not:
They are not moral clarity.
They are not about fairness.
They are not right.
They are about economic illiteracy.
Like it or not, we have the lifestyles, jobs, and homes we have because of credit markets. If lenders withdraw from the market because their balance sheets skew negative -- our suffering and anxiety today will look like child's play. How about NO mortgage loans? NO small business credit? The economy would shrivel, jobs would disappear. Other policy goals that one would RATHER see $700B spent on will be impossible if the economy tanks.
Government funding can't replace private credit markets.
Let's not confuse matters: Government needs to act and act now to restore confidence in the credit markets.
Remember the Resolution Trust Corporation bailout? 744 savings and loans were liquidated by the government. It took them and then sold the assets -- not at fire sale prices, either. The total cost was $87 Billion, far less than estimated at the start of the crises. We'll get back some of that $700B from asset sales as well -- but only if we stem panic now so credit markets don't freeze up.
Sometimes in business, you have to act fast or face horrific consequences by delaying action. This is one of those times.
Wednesday, September 24, 2008
It's like the old story of the frog and hot water: throw a frog in boiling water and he will jump out immediately. But put him in cold water and slowly turn up the heat...and he will die.
Gradual unhealthy change is below the threshhold of awareness...but it can still kill you.
The US financial markets risk levels increased over the past 15 years....the illusory profits of the dot com boom bolstered by an increase in the money supply....which gradually found its way into mortgage backed securities....and to main street via riskier mortgages....household income and mortgage debt became decoupled....housing equity turned to debt....
Every boom crashes because we run out of buyers of high priced assets. The early participants keep the winnings, and the latecomers can't sell their houses, don't get the appreciation they counted on....
Law of nature, law of financial markets.
Tuesday, September 23, 2008
What Alex Mandrossian does shows how the game is played at its highest level for those selling professional services and information products.
Everyone can play their own game, but knowing how the pros do it is invaluable, because the pros "build out" every idea to its maximum effectiveness. ..as well as come up with new ideas (such as building in a recording next to every paragraph so someone can listen if they don't have time (or the sight) to read).
Here is an example of a virtual book tour, one of his innovative ideas:
http://www.alexmand ossian.com/ category/ virtual-book- tours/
Saturday, September 13, 2008
What is so interesting is that there is more inner emotion leaking out on this topic than just about any other one I've seen. Just about no one feels comfortable with money! And the issues aren't really about money -- they are about self-worth. Discomfort with asking for what you want, discomfort in having enough, you name it.
These are normal human emotions! But when you are the business owner, normal human emotions can have unpleasant financial consequences. For most of us, becoming the CEO of our own financial life will require some work on our own selves and beliefs around money.
The great Sufi philosopher and poet Rumi is primarily known for his ecstatic poetry, but he also wrote this line which I woke up thinking about: The answer to the pain is in the pain.
What that says to me is to face into money directly. Changing the focus to a question of self-worth takes the sting out of the question, but also takes away the power of the answer.
What is it about money that makes it so difficult? I think it is because money is so finite. Either you have it or you don't. Either you can pay for the life you want or you can't. Lots of us like to straddle the fence, and work toward the life or business we want. It is terrifying, painful, embarassing, makes us sweat, to really look at how we are doing, to look at numbers that quantify our progress and nail our truth to the wall.
That is the pain Rumi talks about. It's not just about money -- it is about whether we are actually living the life we want. And as long as we skirt this issue, we live in a cloud of potential and possibility while our reality is something else.
Sometimes when we face unpleasantness, it feels like sinking into an abyss. But that is not what Rumi promises -- the answer to the pain can only be found by looking at the pain, as gently as possible. Your answer and my answer and someone else's answers are ours alone.
Emotions tied to money are surprisingly powerful. When you have a job, when someone else determines the financial box in which you live your life, you can skirt taking a look at them. But when you are the CEO -- you create your own parameters. Unexamined emotion about money can keep you boxed in. And looking at those emotions -- just gazing -- often is enough to start opening up a door to whole new financial world.
Tuesday, September 9, 2008
-- not about how much money you make or how successful you are, although if you really can get results for your clients, you will be successful.
-- as much about how people feel when they are with you as your technical skills
-- a lot about how trustworthy, credible you are. Your clients are trusting you to distill your specialty for your benefit.
Doing what you want to do is tender stuff. Often it is covered over with discouragement, cynicism, fear, or just plain forgetfulness. If we probe deeply enough, we find the roots of these emotions that stand between us and doing what we want to do.
Often they are simple enough. I writer friend of mine had a severe attack of fear after finishing the first draft of her first book. She shook with fear. Upon probing (how old are you now? where are you? who else is there?) she recounted a scene in which she was tormented by her older brother because she had written something....she had talent and her brother did not, so he set out to destroyed that of which he was jealous.
Her brother wasn't evil. These are the things that afflict all humans. The trick is, if you want to do what you want to do, you have to be ready to get whacked by these old fears. If you just had a job and followed a script already laid out for you, you wouldn't have to bother. But as a freelancer, solopreneur, whatever, who you are shapes what you do in a very significant way.
You need to grow stronger so you can endure these torments, bat them away, and get at that deep talent within that wants expression through your business. And to be prepared to do this again, and again, and again. It's the price of admission to this creative, wonderful world.
One way hit me as I was reading a book last night called The Five Love Languages, about how to understand your innate language for feeling loved....one line in the book really got me, about how sharing love in the way each part of a couple need to feel it leads to feeling loved (running on a full tank is the metaphor). And...feeling that security in love is needed so that each spouse feels secure enough to be all she/he is inside, to develop their entire potential.
WOW! That line really stayed with me, the idea that marriage can make you more of a complete person than you were when you were single. My happily married friend Therese told me that she felt more herself with her husband than when they were apart. I felt that with Bill...and hearing it from Therese gave me confidence to keep going when I felt insecure about this radically new direction after a full life as a single woman.
So this book claims that becoming yourself fully is part of the promise of marriage.
I have always been focused on personal growth (I was a psychology major, and avid reader about inner development along with many other interests). I invested money in my own development -- classes, coaching, time and money to pursue interests. But I never invested in loving another person, I would say because my idea of marriage was never that it was about growth....so I was the wrong one here!
Recently, I virtually depleted my savings when we suffered a job loss and other reversals. It was a true emergency for the family. It was very hard to go way below "my comfort level" and it occurred during a time in which I was undergoing active treatment for breast cancer. Reading this book made me realize why it was so hard: I always saw that money as insurance that I could continue to grow as a person, to not be reactive and function at the survival level. I've lived that way for several years, owing to time spent on eldercare, then losing my business during the 9/11 aftermath. So my windfall from selling my house is nearly gone. I feared going back to that kind of living, hand to mouth.
But, do you know what? It's different when you have love in your life. It wasn't the money I was afraid of losing, it was the opportunity to become who I really am. It's not possible to do that when you are afraid all the time. I calm my fears now, not only with money, but also with the message in that book, that love can be rich and deep if you will work at it when the initial infatuation wears off, and that it isn't only money that makes the world go round.
And having said that, I feel more confident that I will regain those funds. And I no longer feel that my very existence is tied to how much money I have in the bank.
Thursday, September 4, 2008
Younger people start things using technology at the drop of a hat. Just tonight I visited the site of Nate Westheimer, a 20-something who has a simple site that combines video and text to promote his political views. http://wtfpolitics.com Tech expression comes naturally.
But technology is a tool - it is not a business. Entrepreneurship is about creating value for customers such that they will pay for what you offer and return you a profit...thereby making your endeavor self-sustaining. Entrepreneurship primarily requires understanding the needs in the market. That is a synthetic kind of knowledge that comes with "time in" a field or market.
Some boomers are more likely to have the time in, the experience, to create profitable businesses. But not all have the entrepreneurial savvy to carry through their ideas. There is a special kind of support that I think could help those who see needs to convert those needs into businesses.
However, I think younger people, in their 20s and 30s, are pioneering the concept of lifestyle businesses, essentially a portfolio of activities that make a living, activities made possible by technology. Perhaps the most well-known (but highly debated) proponent of this concept is Tim Ferris, author of "The Four Hour Work Week." It's a great concept that boomers can learn a lot from as they consider creating more rewarding work after toiling in a job for years.
Nothing wrong with using technology to create interesting work for yourself! David Birch, a researcher out of MIT, calls that "job substitution." It's just plain not the same as entrepreneurship, which creates wealth for the owner, jobs for others, and fuels this nation's economic growth.
Talented people have always found ways to use their gifts. Now technology makes it easier to express them. It is less and less necessary to compress our identities into a single job when information technology gives us so many tools to express all that we are...whatever our business goals may be.
Wednesday, September 3, 2008
I started this business when I was recovering from an illness, when I couldn't really concentrate enough to read or write. It's been interesting to figure it out, the ins and outs of how this works. I got a market research package and learned how to make more money on given listings. I upgraded my listing pages with a funky 1960's "summer of love" theme. I run a slide show of photos for each listing.
But last night I was thinking that just plain buying and selling loses its charm for me after a while. I sell new coach purses and used women's clothing. The new purses are much more fun...they are a good product that people love. I really enjoy selling nice new things.
But just to change things up, I am buying 10-15 used coach bags and reconditioning them for future sale. I'm getting them from individuals on ebay who don't really know how the market works so are selling inexpensively, and bags that have stains that I think can be cleaned up. I'll see how this business works.
I actually like the process of figuring out the business end of things. When I started, I was thinking, wow, how can I sell $500 a month, that would be awesome, I had no idea how to do it. But I gradually figured it out...and now sell about $1100 a month. It feels great to have this tool in hand. I'm about to set up a coach blog (and myspace page) with an ebay widget so people can find my listings from outside of ebay. This I like, gradually figuring things out.
But something is really unsatisfying about the "used" element of all this. It is a familiar and too comfortable space for me...but it is not really satisfying. Instead of wanting to sell these various bags, I keep thinking that I would like to give different ones to different friends and relatives. It just seems too small scale. I never saw myself as the purse lady or an online flea market vendor or yard sale entrepreneur. Yes, we do these things when we have to....but I want more complexity.
Nonetheless -- I now understand the online world in a way that I never could have had I not started small like this. I guess this is bootstrapping knowledge (not money) -- I took what I knew and leveraged it into something I didn't know, but now do know.
My goal was to create an additional income stream for us. I learned that online searches for coach products spike in the fourth quarter (back to school and christmas, no doubt). I also learned that most of the searches originate in Asia; I've had a customer from Malaysia and Singapore, and bidders from Japan. So I am thinking that I can upgrade my presence and see what I can do over the christmas season.
There is something rewarding about simply earning a living like this. But the used, flea market stuff doesn't float my boat so much....I see this becoming a real business.
Well, she happened to have a daughter who has a passion for doing what she likes and earning a living at it. A daughter who needs to feel alive and expressive 24/7. That daughter has a lifelong conflict with that impulse and the practical side which is all about earning money.
I do believe that we are here in large measure to advance the human spirit by taking who we are, and how we are raised, and fusing them into something new. My task as I see it is to take my absolute need for expression, and my absolute need for financial soundness and stability, and fuse them. It is my "bet the ranch" project right now.
Monday, August 18, 2008
HOWEVER -- over the years, I noticed a strange thing: As much as I wanted to put my "ordinary person" economically marginal past behind me, it continued to fascinate me. How do people live when their opportunity to advance is so limited? When nothing you try seems to add up, because the fundamentals needed for growth are just not there? When being an "ordinary person" is seen as a worthy aspiration?
Even though my career was a very "Washington" one, working in advocacy groups on public policy issues, major philanthropic and charity organizations pursuing worthy causes, something was missing. Those liberal advocacy groups seemed to point toward an unachievable future -- "If only government would adopt our plan." All those plans would never be adopted, so I couldn't accept those public goals as my goal.
It was only when I started a consulting business working with those groups that I started to see my way: I found I liked the business part much better than the substance of the work I was doing. How could I like marketing better than hearing the Secretary of the UN speak? Or than interviewing famous people? Or working on critical national issues?
I began to get a handle on how much Buffalo was still with me. The questions my adolescent self asked (and abandoned) still gnawed at me. Future Shock, Alvin Toffler's book that came out in the early 1970s, predicted that the economy would change from one based on large corporations to one based on technology-mediated smaller concerns (and he was the one who recommended the break-up of AT&T to its management). As a high school student, I was keenly interested in reading it -- but did not, out of fear...I somehow thought it would destroy my careful adaptation to my world. I had been biding my time to leave....since I was about 12 years old. The freedom would have to wait.....
I later came to see his book as a bit glib....But Toffler's life really appealed to me....a writer who followed his instincts about the world, researched them, and wrote what he saw.
At this juncture in my life, I can see that, intentionally or not, I have lived the same way. I learned about the world through my work....as a counselor to pregnant teens, to adult women offenders, and teenage boys in foster care, I met a rich stew of misdirected people and learned plenty about frustration and self-defeat; I moved on.
As a Washington fund raiser and consultant, I learned plenty about how public issues are packaged, sold, and almost never resolved. Keeping the game going is the game. And I saw that that is actually not a bad thing.
But I was ready to move on to something more meaningful. And at every turn in my life, some core questions from my Buffalo years came back to nag me:
* What makes some economies grow while others decline?
* How can we ensure that people aren't poor, that they have the resources to live a good life, one without despair and hopelessness?
* Is the emerging global economy capable of stability?
And perhaps the most meaningful to me personally --
* How do people have to change to participate in this global economy?
I sometimes think I put the cart before the horse -- in that last sentence, I'm saying that we should change when the economy changes, rather than just continue to be ourselves. Well, I stand by that assertion.
Freud said that man has two fundamental needs -- love and work. We change in order to live with the people we love....and we must change in order to work. History is full of stories of difficult change undertaken when the world changed -- displaced farmers having to GET UP BY THE CLOCK AND NOT THE SUN to report to a factory rebelled against this regimentation that had no precedent.
The price of change is high -- but the promise, I believe, is a greater sense of self, of self-expression and self-discovery. I am not alone in calling this quality resilience.
And resilience is fundamental to the American character. It is our gift to the world. Our personal resilience is about far more than just us, it is about the continuity of our national journey. Our resilience has built this country over centuries, and it will save it now.
I believe that RESILIENCE WORKS. And I intend to explore it in this blog on several levels:
(a) Personal Resilience
(b) Business Resilience
(c) Economic Resilience.
All of these are braided together....we contribute to and we draw on the pool of American resilience, especially now.