Tag Archives: economy

The New Normal

I was meeting with a commercial tenant representative today over coffee, and during our discussion about what trends he was noticing in business, he said that he had been accumulating leads more rapidly over the past few months.  His view was that people were starting to consume more, or at least entertain thoughts of consumption and expansion efforts in business.  They’re not feeling more confident because the economy is on an upward trajectory, they’re just tired of being depressed.  I think he’s absolutely correct.  When you get hammered by a lot of bad news, eventually you don’t care anymore.  It gets to a point that you become sensitized toward bad news, and you just start moving forward with plans, and loosening the purse strings for no other reason than you become tired of the ways things are. 

This is the new normal.

Thinking about this, I realized that, although my set of circumstances differ, and my perspective is shaped by the view from my seat, my conclusion is the same.  

Things changed in the Fall of ’07, and have not been the same since.  2009 was an improvement, challenging but good.  Business in 2010 is different to the way it was in 2009 — things are changing rapidly.  There’s more activity, but not greater volume; clients are focused on cost cutting, do not have the ability to risk their remaining resources, are being smarter about their spending, and are less likely to ride with a project for as long as they had done in earlier years.  These factors are pressuring the market for services to change from the a la carte delivery of specific services to a more all-encompassing pre fixe.  Clients are demanding the delivery of those services in a way that adds value to their projects.  This is leading to more price stability for buyers of services, more specialization and niche building by sellers of services, and a movement away from the traditional ways in which services were priced and delivered. 

Once again, a new normal.  

Naturally, the question of whether we “are at the bottom” and “when is the economy going to return to normal” will be asked.  Well it isn’t going to — there’s a new normal. 

Our economy has lost millions of jobs during this recession, and even if we could replace them, it would take many years to do so.  Current business conditions, however, discourage small businesses from adding new workers.  Specifically,  health care costs, taxes, data privacy concerns, payroll costs and employee benefits are a major discouragement to hiring new employees.  At the same time, new technology has made it easier to outsource job functions than to hire more employees.  A company that needed 8 employees 10 years ago, can now achieve the same output with only 3 employees.   It’s possible now to bank online and make deposits from the office; bookkeeping  and accounting are easily outsourced as online software programs download banking, billing, revenue and expense data and process the data into registers and reports; billing and accounting information can be accessed from the internet by an outsourced independent contractor; printing, copying, marketing, advertising, internet strategy, as well as informational technology are all outsourced, and administrative and secretarial services are shared between companies that have co-located in larger office space, with any excess services needed being handled by virtual assistants. 

My point being that the old jobs lost are not going to come back, big companies will shrink, and small companies will try to remain small.  Jobs are being created, and will continue to be created but they are being created by new businesses, not existing businesses.  The new jobs are in different fields, and workers will need new skills. 

Once again, this will be the new normal. The new normal is to adapt or die.  Adaptation will need to be done quickly, and will require one to be nimble.  Large entities are by their nature not nimble and cannot adapt quickly enough to create significant opportunities in the new normal.  It’s up to us little guys to do that.  I’m up to the challenge, are you?

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It’s a small (potatoes) world after all!

Blogging offers an alternative to the mainstream media. If all we were told came from TV programs like CNBC we would believe that the state of the economy as a whole is based upon the rise and fall of the Dow Jones Industrial Index, and that we’re now in a relatively stable market. In fact, with each bear market rally there’s the declaration that we have finally hit bottom, and that the recession is losing steam.

Really?

The Squawk Box protagonists seem oddly out of touch with the economic realities facing us regular folks. The stock market right now is not for individual investors, it’s only safe for professional traders. The rest of us know we are deep in the throes of not only a recession, but a wholesale re-ordering of our economic realities, and of the makeup of the United States as a global financial power.

What the Dow or the S&P do in the next 6 months won’t help us avoid what is to come, or what needs to be done.

Yet this is one of the best times for small businesses that have grit, determination, and the ability to sense an opportunity, and there are a lot of opportunities out there. The marketplace is finally shedding its fascination with large enterprise, as it should. There are many of these business models that do not work — think of the financial supermarket concept a` la` Citibank.

The marketplace is now embracing once dormant concepts like customer service.

Strange how we consumers didn’t like being transferred between innumerable voice-activated menus and virtual attendants, only to land up in someone’s voicemail when we requested to talk to a representative.

My sense is that we’re in a more “small potatoes” world now than we have been in a long while, and that’s what people have always wanted. The “bigger is better” theory is gone, and good riddance! The law firm with 1,000 lawyers in 16 countries never resonated with me, and I suspect didn’t do it for most other businesses not currently contemplating the acquisition of an Anheuser-Busch. I was always uncomfortable working in, or doing business with large organizations. Don’t believe that you get the best service, expertise, or product from a large organization or professional service firm, because you don’t.

Small businesses have always provided clients with impeccable customer service; have always traveled to see clients (not only to sign up the client but for the ongoing servicing of the client’s account). We have always got to know the personalities behind the client, and the inner forces that drive our customers, because we feel the same impulses. It’s not a new marketing concept to us small business owners, it’s what we do! The fact that the economy is circling around and garnering respect for basic and traditional values is music to our small business ears. My advice is to go out, find those opportunities out there that fit your business niche` and pursue the challenges you have without regard for the size of your business or your perceived strength. There’s no doubt that not only will you compete, you will crush the big guy.

Government Intervention

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 The economic models of socialism, capitalism, and European-style socialized capitalism are under pressure given today’s economic realities.  In a global economy, where we are all inerconnected and inter-dependent, the reality of which model will be most effective in attending to our issues is murky at best.  John Byrne (Business Week’s publisher) sums it up best, “[t]his is the first financial crisis of the global age. There is no clear map to deal with it”.  When left to its own devices with minimal (or ineffective) governmental regulation it appears that the US capitalistic, free-market model can lead to short-sighted and self-serving decision making, that while fostering ingenuity, rapid development and competition can also lead to gluttony, abuse, and bottom-line fixations that are self destructive.  This over-inflation of the proverbial bubble, which of course will inevitably burst, tends to then eliminate a great amount of the progress and advances made by the capitalistic framework.  On the other hand, there is the socialized capitalism model that comes with increased government intervention, which I see as leading to less innovation, competition and growth, making it a minority shareholder in the global economy and allowing a purely capitalistic society to overtake it, and in doing so drag it into the bursting bubble. 

With our TARP $700 BN bailout fund, the first 1/2 of which went to partially nationalize banks, AIG, and temporarily bailout automakers, we seem to be proceeding full steam down the path of becoming France.  Moreover, Citigroup is essentially in government receivership.  Now, although I agree wholeheartedly with President Obama that the Wall Streeters (from technically bankrupt entities that have been propped up by taxpayer bailout funds) that paid themselves 2008 bonuses while receiving bailout funding are shameful and should be brought to account for their actions, the stance that our President is taking is a clear case of government dictating to private commercial entities how they should operate and compensate their employees, and that is about as close to socialism as we have come.  So what is the best way to go about this?  Is it necessary for the government to intervene to this extent or not?   I guess I am advocating for a managed (or regulated) capitalism as opposed to a socialistic capitalism.

Please comment.

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