Economists are Nothing More Than Weather Guessers

We, in the United States, put a whole lot of credence in economists. Why is that? These are the seers into our economic vitality, into our pocketbooks and bank accounts, the keepers of the stories of our destinies of wealth and retirement. These clairvoyants are our layman’s translators to the oodles of data that indicate our financial health.

And the results? These folks are no better than the weather guesser who Monday morning apologized for missing that ‘rouge storm’ over the weekend that caught you and the family outside on your picnic. Now the kids have fevers and you have a cold. Oh yeah, and you have to travel to India this week for work--- fun times with a 30 hour plane trip in a tube of re-circulated air.

Just like weather guessers, our economic prognosticators are correct 100% of the time…. After the fact. How do we define a recession? After we have already been in it. What data do they prefer to use? Lagging indicators. Do they ever say they were wrong? No, just new data came to light that has now been included.

Prime example- our current economic turmoil. Our diviners even had to revise ‘growth’ data after it had been published. (How they looked at data and declared growth, and then a couple of quarters later the same period had negative growth is beyond me. Good thing these folks are not in charge of our corporate financial departments. People go to jail for making ‘revisions’ that large.) Thanks to our leading minds of economic theory and insight, we have now been declared to be in a recession for near a year. If they had gotten it right the first time, we could have known 6 months ago.

Our economists, these smarter than smart folks, missed the signs of our pending risk. Overhyped capital markets. Housing booms across the nation. Inflating prices to unprecedented levels. Rising incomes. Consumer debt levels that rose disproportionately. Yes, I missed those also, but then again, I never claimed to be and economic soothsayer.

So where does this leave us. Who knows? Our esteemed oracles now seem to be all over the weather map. Some are in sunny Florida claiming we are at the bottom, and better times are ahead. Some are in wintry Michigan, saying the next storm is on the horizon.

Oh, I get it. We will know. They will be right in telling us where we are today with our economy…. In about 6 months…. Maybe.

Bailout Blunder

Wow. It only is getting worse. And I do not mean the economy. How poorly can the government screw up the system?

Maybe I am a Libertarian after all, as I am feel some serious cynicism towards the whole debacle.

I will share with you how I got here.

First as the banking system started to implode, rather than letting efficient capital markets *and Darwinism* guide us through the turmoil, we decided the industry was ‘too important’ so the government stepped up to the plate.

Swing and a miss…. Strike One!

If the US is the world proponent of democracy and capitalism, why is it when a company performs poorly, and takes untoward risk, the government rewards that risk…. By buying it out.

Now we have set a dangerous precedent that any industry that feels it is an essential part of the economy can head to the government for a ‘get out of jail’ card when it screws up to the point of collapse. Sweet…. Now those companies can take any absurd risk desired in swinging for the fences for that proverbial home run. The US government has guaranteed them at least a ‘walk’.

Why do you think that the car companies, housing companies, etc are coming, tin cup in hand, to the government’s doorstep asking for their share of the pie…. Heck, some are bold enough to ask for a new pie to be baked.

Second, after the government says ‘no mas’, this past weekend they decide ‘mas’. Citigroup is just too important.

Swing and a miss…. Strike Two!

Amazing that the government turns around that quickly on its own stated policy and will bail out a company if that one company is ‘too important’. Too boot, the government agreed to bear the burden (thanks to you and my tax dollars) 90% of the toxic assets valued at $300B… no not a typo at million… yes billion!

So this means that a) the government WAY undervalued the bailout plan, if one company is 43% of their total plan, and b) if a company can prove that it is vital to the economy, it can break any rules/guidelines the government has set in place.

Hello Wal-Mart, Microsoft, Exxon, and City of New York. Spend any amount you want on any absurd project. Don’t worry. The government has got your back! Want to invest in that first project for life on Pluto (the non-planet, planet)… go ahead. The returns just might be great. If not, you can just offload that project to the US citizenship.

Then just this morning, I see that the US government is announcing a new program today to ‘ease’ credit for things like auto loans and credit card. Hmmm… so we are encouraging people to go MORE into debt that we already are.

Amazing! The middle class American family spends more than it makes…every year. As a population, we are in debt. Now the government wants each person to be able to go more in debt. Wonderful idea. Rather than encourage positive behavior, just throw more fuel on the fire. Why will GM, Ford and Chrysler have to change their strategies and plans, if the government is going to enable consumers to get more bad cash to invest in poorly made vehicles?

Here comes the sinking fastball. Stepping into the pitch… oh, well… they can give themselves a free base. Swing away.

My Issues with Charity

I have a personal issue with charity. Don’t get me wrong. I think they serve a great purpose, and I even sit on the board for a wonderful organization (Wonders and Worries). There are many though that have a fundamental challenge they have yet to address, changing the game to affect the issue they are trying to help.

This is very apparent in charities that address poverty. While I support both of the following, I want to highlight these charities as examples of organizations that can do better.

Mobile Loaves and Fishes

One of the most respected and fundamentally good organizations to help provide food for the homeless. With a fleet of trucks, and hundreds of volunteers, MLFs brings food to the people, where they are in local communities. Yet, is this not just continuing the cycle? What incentive is the organization providing to the people it serves to break the cycle, and help them get jobs, income and the ability to purchase their food? With a steady schedule of handouts, and only verbal encouragement to look for opportunity- my $.02-- not much.

What if MLF had the people it served learn tangible and relevant skills in return for the food? Would that not provide a platform where the skills could be applied productively back into the local community and try to break the cycle? Just an idea.

Coats for Kids

Another worthy cause. Helping provide warm clothing for kids who could not otherwise afford. Again though, is this not just a handout? What incentive does this provide to help the families to change their cycle so that they could afford their own warm clothes in subsequent years?

What if CFK could help parents of kids who benefited learn seamstress skills? They could then help repair/fix clothing for extra money, and provide a bit of incremental income to purchase that jacket next year. Maybe not a big difference, but sometimes a small change is all you need.

These are just two examples of charities that could alter their models a bit and create more demonstrable change in the communities they serve. A couple of examples have been highlighted on Tech Crunch today. Check those out.

Can you think of others in your local community? Reach out to them and offer your thoughts and help. Collectively we can make a difference.

Social Media Construct to Address Poverty

Poverty is a serious issue. It is estimated that 33% of the world’s population live in poverty. 20% are estimated to live in true ‘abject poverty’- meaning always hungry. Not sure what poverty really means? Check out the Wikipedia or dictionary.com definitions. Bottom line, base life sustaining necessities are not adequate.

What is the face of poverty?

• It is the homeless vet on the street corner
• It is the child abandoned in India
• It is the unclothed family in Africa drinking from a puddle in the clay earth
• It is the child that enters the local elementary school each morning with the same set of clothes, because those are the only ones they have
• It is the family living out of their car, and taking scraps from behind restaurants to feed their family
• It is the woman living in the woods, asking for money to feed her baby at the stoplight

How can we make a collective difference?

My posit is that we can look to the same construct so many of us in social media preach:

• First: Connect
• Second: Engage
• Third: Influence (and influence the influencers)

Let’s see how this can work.

Connect:

At the end of the day, we cannot make a difference if we do not first truly understand the nature and magnitude of poverty. This is more than reading the on-line media. This is more than shaking the hand of the guy on the street corner, or worse yet throwing him your spare change.

Remember the old adage, ‘seek first to understand, and then to be understood’. Well, forget the latter, and just seek to understand. Reach out and connect. Spend some time at soup kitchens. Take and hour and visit with the person on the corner. Ask questions, listen, internalize. Do not try to direct or provide answers right then and there. You are not prepared.

Engage:

Engaging first internally (within yourself) is the most important part of the process. It marries the base knowledge you have gained from connecting with your passions. When you find that intersection, you can, and will, make a difference. Doing something because it is politically correct is good, but not sustainable. Doing something because you are passionate about it is sustainable, and provides a greater benefit as your heart and soul are now involved.

Next, engage externally. Link your internally found passion with the community around you. A great example in Austin (my local community) is The Miracle Foundation. Caroline Boudreaux found her inner passion and had engaged with communities in India to help orphaned and hungry children.

This becomes your own personal virtuous cycle.

Influence:

Exerting influence is the tipping point. It provides the catalyst where the impact you make is broader than the brute force you alone affect. Influencing those around you, and having their support causes a synergistic effect, where the ultimate result is greater than the sum of the parts.

The key to successful influence is by connecting and engaging those who are of like mind, and have journeyed through the same process. If they too have experienced that connect/engage process, the community you build will reward handsomely.

Building an Eco-System – Risk of Taking it Too Far

Business around the world has moved in rapid force towards building eco-systems to effectively compete in today’s markets. The smartest of these businesses have conducted serious reviews to identify what their core competencies are, and focus on developing those, while solving everything else in creative manners.

Think about the ‘buzzword bingo’ lingo that references this:

· Asset light business (AMD and Dell with factories, Rackspace and The Planet for IT Hosting)

· API (I know generic, but linking 2 disparate applications and having them play well together so can focus on building only 1)

· Outsourcing (near anything and everything- from call centers to back office support)

· Services Firms (consulting, accounting, finance, advertising, etc)

· Aggregators (E-Bay, Amazon anyone?)

· Wiki/Blog/Communities (social media on the Web is a fundamental way to build an creation and distribution system for information)

Oddly enough when we take a step back, we see how this had affected our personal lives.

We already see such things as:

· Concierge services (your errand runners)

· Pick-up/take-out/delivery (of near anything now from food to clothing)

· Services (accounting, brokerage, cleaning, lawn service)

It is already happening. How much farther will it go? If my core competency is not working out, will someday I be able to contract with someone who is, and get the benefit for myself? Could I contract out my sleep, and still feel rested when someone else much better at sleeping does it for me?

Is this what we mean by building out our personal ecosystem? Or will we take it too far?