Our economy has been going through cycles – up & down – since the depression in the 1920's. Cycles start and cycles end – we are trained to expect things to 'return to normal' at some point. 'NORMAL' was back to growth and abundance – with some adjustment, it was business as usual.
We will not return to rapid growth and abundance this time within the span of a cycle or two. We ARE back to normal, but it is a new normal. What you see in the economy today is the new normal. It is more modest with less return and growth than we have enjoyed in the past. So, it is time to quit holding our breath - waiting, and get back to business at this level and pace.
We may have been distracted by the economic implosion and missed the structural change that has taken place. Seth Godin calls it “the forever recession” which is the end of the industrial age and local markets. Now it's best mix of price-quality-value for goods & services and the extensive access to information and communications for finding them.
The reality of all of this shows up in a recent conversation with a guy launching a start-up – his planning uses what is today for scale and scope and being flexible for opportunities as developed.
Good point of view for all of us, don't you think?
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Sure is hard to forget what I thought was going to happen!
ReplyDeleteReposting comments and my replies:
ReplyDeleteMathieu Federspiel • I've started collecting statements from authors who do not see a return to what used to be normal. Your question seems mostly economic in nature, which in recent times depended on continuous population growth and other non-sustainable fundamentals. Future Shock is here. In May 2010 Scientific American, Lawrence Krauss stated "...there is no chance...to stave off considerable change to the planet's climate..." (Human Uniqueness and the Future, p. 36). Read also Eaarth and Threshold, two great collections of information about limits which have been exceeded.
Taking the view that normal will not happen, the other part of your question is what will happen. There are some enclaves of people who are developing environmental friendly technologies and lifestyles. I hope this gains momentum throughout society and corporations. But for the most part they are in conflict with multinational corporations which have great political power (even though they cannot vote). For example, massive solar farms are being proposed, but distributed panels on factories and houses more appropriate. The economy will have to change, as will individual lifestyles, and the question is can this occur peacefully. For a time, economic growth could be the result of changes from oil-based energy to other sources, as well as other large lifestyle changes. What then?
Jack Gates • Mathieu:
Thanks for your thoughtful comments.
The effect on the economy is obvious, but the structural change is even greater, but less visible. Individuals are identifying needs and finding marketable solutions - and can do this from the kitchen table for a world market.
Look at the effect of the Android smart phone - I can write my own app for the phone, and you can change that app to meet your needs. No need to wait for the carrier or manufacturer to do it. Same is true for solar devices and LED lighting for consumers and business - developed by individuals. A great deal is changing with this disruption in the norm. Busy table - new opportunities - as reality is evolving.
With the underlying structural change comes a shift in point of view, and with that a new view of current reality. Amid the pain of the tumbling economic conditions is the innovation and optimism of new opportunities to address the vexing issues.
matt milne • it will get better, but only if we make it better. Could take a year, could take ten.
Jack Gates • Matt:
Thanks for your comment. You have hit on a key element of the structural change - it requires our participation not our anticipation.
Rosaliza Julao • ...
What is normal?
Change is a part of life...
The present economic condition is now teaching us a lesson...
Spending what you don't have is the main reason why we are where we are now...
Learn the lesson and move on...
Jack Gates • Rosaliza:
Thanks for your comment.
Spending within our means is great advice for individuals, businesses and even countries.
Reposting comment and my reply:
ReplyDeleteJack Rollan • There has been at least one recession/depression EVERY DECADE in US history. The dotcom bubble was the longest expansion.
The current recession may be just beginning..... Japan has been in a real estate-based recession since the Lost Decade of the 90s.
THE GREAT DEFLATION
Japan, Once Dynamic, Is Disheartened by Decline
By MARTIN FACKLER
Economists are pointing to Japan, which has been trapped in
low growth and deflation, as a dark vision of the future
for the West.
http://www.nytimes.com/2010/10/17/world/asia/17japan.html?th&emc=th
Jack Gates • Jack:
Thanks for your comment.
The growth - contraction cycles of our economy are merely adjustments - but the underlying structural foundation has been pretty much the same since the early phases of the industrial age. What is different now is this structure is changing - not as visible as the economic change - and this is NOT a cyclical adjustment. It is an overhaul and will continue to create disruption along with opportunity. It is has a world-wide impact.
It is an interesting contrast to see a world stage with individuals as the key players for change. As in "Makers" by Cory Doctorow.
Reporting of comments and my replies:
ReplyDeleteJack Rollan • We are entering a Post-Industrial Age, where most workers will either be temp, contractors, p/t, consultants, or mgmt/exec.
Millions of workers (especially aged 50+), are never returning to traditional work, which is being automated, outsourced, or has become obsolete.
Jack Gates • Jack:
Agree that we are in a Post-Industrial Age and that how we do work is changing. this will affect all the workers. For their entire career the group you call 50+ has seen little structural change in the of nature employment and may face the most radical transformation. But they've shown how resourceful they can be in the past
Walter Wise • My estimate is at least 2 more years and possibly 3. And firms that are doing nothing to grow now, will not be here when the turn-around begins. Walter Wise • My estimate is at least 2 more years and possibly 3. And firms that are doing nothing to grow now, will not be here when the turn-around begins.
Jack Gates • Walter:
Thanks for your thoughts.
I strongly agree that organizations that do not make changes will have a hard time with recovery from the economic cycle and will fail from the structural changes that are also in play now.
Walter Wise • I don't think that I can go so far as to agree with Mr. Rollan however. I just don't see it that way. I think you see a lot of consultants and 1099'ers now because of the economy. Companies need staff but don't necessarily want to take on full time employees and the expense that goes with it. I guess the risk of taking part timers is worth taking.
Jack Gates • Walter:
Time will tell on that point.
A different view is the shift to individuals providing for needs, instead of only by companies, and the wide availability of the tools and resources to do so. Look are the user-written apps for the Android smartphone as an illustration.
James Vaughn • Normal is a static concept. I do not see it as applicable to the dynamic nature of economic systems. There are certainly stability points in our economy but they are both shifting a fleeting. I think this belief in "Normal" economy leads to general misunderstanding and bad economic policy. If you treat a dynamic system as though it were static, your actions will always be reactive rather than proactive.
ReplyDeleteJack Gates • James:
Thanks for your views.
We are truly speaking about changes in the economic systems - transactional and structural. How we react and adapt will determine the new reality.
Reposting comments and my replies:
ReplyDeleteJacek Marczyk • Jack, I believe this time it won't happen. Italy's minisiter of finance said that this crisis is the" end of the beginning"! I couldn't agree more. This crisis has sparked some irreversible processes, so getting back to normal won't be easy. Besides, what is "normal"?
Jack Gates • Jacek:
Thanks for your comment.
'Business as usual' or a 'Field of Dreams' (build it and they will come) does not seem viable foundation for planning today. The visible economic situation is cyclical - so it is logical to assume recovery at some point. The underlying structural change on the other hand is permanent and will not 'recover' but will continue to evolve. I interpret comment by your minister of finance as recognition that the transition from the Industrial Age is coming to an end and the marketplace is now on a world-wide stage.
To illustrate, 'back in the old days' the market boundary was the town where you lived - the consumer would compare the value proposition (quality-value-price-availability-etc) among town merchants without regard to offerings in other towns. As accessibility and communications improved, the market expanded to the locality. Through many iterations this has blossomed to a world market.
In general I can sit at my kitchen table and be a consumer in this world-wide market or, from the same table I can be a manufacturer, service provider, or vendor to this same market. This is but a glimpse of the structural evolution and it is challenging not just where business is done, but also how it occurs.
Nellie Scott • THIS is the "new" Normal.
Jack Gates • And we need to plan accordingly!
Thanks for your comment, Nellie.
Kurt Robohm • I think the bigger question behind what is normal, is what is valued?
Is what is really valued that which is cheaper and faster, regardless of the final cost?
We've seen the global economy re-orient priorities towards cutting cost as the be all end all, but is that the outcome that provides the most benefit in the end?
in the Global economy the old "normal" has been given away to someone on the other end of world, where, by they way they are enjoying boom times (comparatively). Who has benefited?
I submit that the new Normal is a manifestation not of how things need to be, but a manipulation of outcomes. We don't have to accept this.
Jack Gates • Kurt:
Thanks for your comments.
We are truly in a world economy and many companies are trimming their cost structure by shopping for components and services in the world market. However, the underlying structure of commence is changing.
With broad ranging communications and the ease of purchase and delivery in this broader market, there is an emergence of the individual as a primary manufacturer, service provider, or vendor. It can be done from the kitchen table with a computer, printer and phone.
Without recognition of the structural changes afoot, business calamity will result; with recognition and ingenuity, opportunity is possible. There in lies the choice.
Reposting comments and my replies::
ReplyDeleteJeff Kincaid • I'm afraid this is the new normal Jack.
Jack Gates • Jeff:
Thanks for confirming that.
More changes are afoot, however, in how we will be doing work from here on. Those are the permanent changes in the underlying structure.
Linda Richey • I can't be too deep this morning as I have been up for hours. I will need to think more before answering to make sense.
What I can say off the top of my head is that I had a feeling 20 years ago. It was to create my own future, because the norm was quickly fading away. The new norm, for lack of better words, is constant, fairly fast paced change. I have two choices, if we go strictly black and white with no grays. To live on the grid or get off it. Not sure which is best. That would depend on the person. I have yet to feel like giving up so I stay in the game. I still have to believe I can make a difference through design. Capitalism will always be capitalism. It always comes back in some form. I don't really care for how nasty some are getting with it, but all I can do is my part.
My thought is to design your own day or ole' days as much as possible. Give your self something, even if small, and do it everyday.
Jack Gates • Linda:
Thanks for sharing your 'before coffee' thoughts.
You've captured the spirit of how the role of the individual is changing in the underlying structural shift. More independence for individuals to help fulfill the needs and wants in the market in new and different ways from the 'old days'. The tools are here now to use when the opportunities are identified.
Reporting comments and my replies:
ReplyDeletePino Villa • What is `Normal`, what it was ? Then there is good probability that we will not return to the previous economic wave caused by easy money, easy loans. The economy will move along as it is doing going up and down in small peaks fueled by the simple economic laws of supply and demand. American and European unemployment will remain high even with good GDP growth for the simple reason that organizations have become efficient (lean and mean). They can do more with current resources without employing additional. What will make a difference will be a major economic wave. If we look at the past we had some major waves such as year 2000 IT spending, then the E-com and finally the easy money from banks. The next wave could be a focused investment in green economy, focused means that economies like USA and Europe agree and concentrate effort. There must be stringent targets , this is the only way to make a big wave rather than small ripples.
Jack Gates • Pino:
Thanks for sharing your thoughts.
The structural adjustment underway is changing (dramatically) our markets and the way we do business - it is logical that the outcome of this evolution will also require new approaches and different development tools.
The evolution may take the form of a massive initiative, such as a world-wide green project, or it could take the form of many, many small, independent projects by individuals or small confederations of independents fulfilling the wants and needs of the marketplace - a world marketplace, rather than local or regional one. It may even take a form similar to individuals crafting functional, sophisticated devices from used and excess parts as in "Makers" by Corey Doctorow.
One thing is certain - it is NOT business as usual.
Reposting comments and my replies:
ReplyDeleteTom Abeles • Pino asks "What is "Normal"..."? I ask what are the metrics so that we can know what is normal. There is the old story about the drunk looking for the keys under the street lamp because that is where the light is, even though they were lost around the corner in the alley. We use econometrics because science tells us that we can "measure" and predict (physical phenomena). Neoclassical economics tells us that we can define and predict "normal" with computer models. Yet, as the economists in France, during the "post autistic economics revolt, were forced to admit before the French legislature, the models are far from perfect, euphemistically speaking.
Should economic models, neo-classical or otherwise, define or measure the quality of life on this planet and set the standards for "Normal" because Enlightenment philosophers are enamored with 17th century scientific models and econometric models have thus become the defacto measure of "Normal" because we have no others that yield quantitative, though questionable measure when we look at the planet and all life forms, including "Gaia"?
Think of, for example, Europe and North America as open, complex, systems where input of resources from the developing world and output of wastes to the developing world allowed the systems to grow and evolve. Now that, as Friedman postulates, the world is "flat", there are no external sources and sinks other than the sun and the universe. Perhaps the models for "Normal" need real re-definition.
This can be seen on a micro-scale where certain populations thrive on the backs of others but the crude econometric measures for such elements as GDP mask this imbalance in resource flows. Curing air pollution adds to the GDP, medical devices for compensating for health effects of air pollution add to the economy.
Maybe "Normal" implicit in this thread is a false god and the rituals, econometric modeling, may be saying, as in The Wizard of Oz, ignore that man behind the curtain
Jack Gates • Tom:
Very thoughtful comments.
Normal can be as simple as a mere idiom - a figure of speech; or it can be a fundamental measure - the general view by the majority; or as complex as a precise measurement requiring sophisticated modeling.
Whatever the case, the structural changes in how we do business have shifted and continue to transform. A quick glance back three or four years ago is quite different than today when viewing the elements of commerce. Even the economic cycle we are in is 'not typical' of those in the recent past - as evidenced by the huge worker displacement world-wide.
We are bubbling along with a structural change that engages the individual more actively (whether within an organization or as an independent) - with a computer, the internet, a printer and phone (this may be optional as a separate instrument shortly), I can enter the world market as a manufacturer, service provider, vendor or consumer...all from the kitchen table. By finding others like me, my table-based organization becomes scalable and, in theory, I can take on tasks well beyond a sole practitioner. More and more examples of this model are appearing all the time now - with successful results.
This is but a small illustration of the underlying changes afoot - it seems quite clear that rapid growth and 'Field of Dreams' planning (build it and they will come) is not the preferable planning model now.
Reposting comment and my reply:
ReplyDeleteMathew Cherian • Reality is there was a bifurcation from the 'normal'. Phenomena are 'cyclical'. Emerging behavior whether it is 'chaos' most likely and when it will revert back to the full blown cycle, most likely, which is going to be the 'nromal'.
Jack Gates • Mathew:
Thanks for your comments.
Let me see if I have it right:
Reality is what IS;
Normal is what is PERCEIVED by most;
Phenomena are the cyclical CHANGES.
Reposting comments and my replies:
ReplyDeleteBrian Empey • Jack, there's an ancient Chinese curse: "May you live in interesting times."
We're in very interesting times, and its going to get more interesting.
There will be a slight re-bound to some areas of the country. But, to a large extent, what we are suffering with now IS the new normal. The jobs that are gone are not coming back. The markets that are gone are not coming back. The people who have lost their homes are not getting them back (and their numbers will grow dramatically over the next year).
Big questions about the near future of US society is: will social collapse come before, or after, the financial collapse? What can be done now to lessen the impact on people and their families? The American people are strong and resourceful. I'd like to think that they will pull through, with or without the support of their government.
And for us up north, where the economy is much better, but dependent on our allies to our south, the question is: can Canada survive a collapse in the US?
And that leads to a big certainty: there will be a lot more questions and uncertainty in the future. Interesting times indeed!
Jack Gates • Brian:
Great Quote!!! So right on target for what's happening. It's scary and fascinating at the same time.
As jobs go away, other jobs will appear to address unfulfilled needs - perhaps not in equal numbers, same locale, or for the same skills...but there will be new jobs. Same for products and services - needs will be recognized and solutions will be developed, produced and sold (on a world-wide stage, however).
The structural changes underway will require greater participation by individuals in delivering the solutions and production (whether within an organization or as an independent). Since not everyone is wired to be an entrepreneur, we must presume that there is a role for the journeymen and 'doers' in this process.
Picture a pond full of water (as in our former economy) - all looks tranquil and beautiful; after a period without rain the water level drops in the pond and some rocks appear - we may even think that are an interesting addition to the picture, but do represent something not visible during the 'good times'; in a serious drought situation, more jagged rocks are evident, along with discarded bicycles, car parts, and muck - the beauty is long gone and we know with certainty there is a huge problem with our pond.
The pond is an analogy of what we are seeing in many businesses - process, procedure, and incomplete planning are showing up with the lack of sales. The organizations that will be successful going forward will put aside ego, tradition, inertia, and procrastination to make plans for today - as it is right now - and execute the changes necessary to function efficiently in this environment.
Governments have a role as well - which is to bolster up the citizens in transition with meaningful programs which help them remain viable while retooling and relocating as needed.
Collectively we have been doing the Whimpy routine (I will gladly pay you Tuesday for a hamburger received today) - well Whimpy, IT"S TUESDAY.
Yep, it IS interesting times.
Greg Franco • So what to do? Maybe get together with friends/family and buy some land, chickens and cows? Have we come full circle back to the beginning?
Jack Gates • Greg:
Yours is certainly one approach, assuming the cow and chickens fit into the apartment.
Thanks for the comment.
Reposting comments and my replies:
ReplyDeleteKaren Schmidt • A friend of mine likes to remind me that Carl Marx predicted the end of capitalism and that is potentially what we are experiencing now. Normal is a constantly changing thing and what is normal for one person is abnormal for others. It's time we moved past the industrial model of work and education anyway. Just listen to Sir Ken Robinson if you need convincing!
Jack Gates • Karen:
Thank you for sharing your thoughts.
With structural change, the relationships and elements change, they do not vanish. We are experiencing an underlying change in how we do business and what the marketplace is. It is disruptive to status quo and the current systems in place. However, there is a demand for goods and services, and they are being supplied - just not necessarily from the traditional sources.
Individuals are innovative, resourceful and adaptive - so it is logical to believe that they will discover and fill needs and wants under a revised structure. Business as usual may be a thing in the past, but business to fulfill demand - even if it looks different - is not obsolete. the individual will certainly play a stronger role in the new reality - whether inside and organization or as an independent.
Anita Oas • Yes Greg. That's exactly what I have. We raise our own vegetables, and fruit. My kids harvest fresh eggs every morning from our free ranging chickens. We compost our fruit peals, leaves, grasses and rabbit droppings. Self sufficiency is empowering.
As far as normal is concerned. This is for me and my kids. It's what you make of it.
Jack Gates • Anita:
Thanks for confirming that self-sufficiency is an option.
As you point out, you and your family are creating your own reality. This is a great live example of the evolving expectation for the role of the individual in commerce. As an active participant, regardless of the business structure around them.
Tom Abeles • Hi Mathew
Is that what one dinosaur said to the other when the meteor struck?
I am not even sure what is "normal". I am in Guatemala, currently and have been in many developing countries. Their expectations and view of "normal" is not what mine are in the US. The recent formation of the South American development bank to break from the neo-liberal policies of the WB and IMF are saying that "normal" is not their normal. BRIC countries, particularly China and India and those at the bottom of the economic pile? What are they thinking as "normal"
Jack Gates • Tom:
Your comments show that there is a regional nature of the perception of normal. Makes sense - this falls into the category: 'of course I see it Now That I See It'.
5 yo 8 years for this deep recession reovery.
ReplyDeleteBack to normal as to 2003 through 2008? or Back to normal as to a time earlier.
The late 90s were based on unrealistic zeal of projections of the Internet and eCommerce. March 2000 the bubble burst.
Then we got on a real estate craze and making new investments out of nothing. The banks and real estate took a beating. That will never be normal.
I think our back to normal will be back to the early 90s or so when people were diligent about what they invested in. Lived more in their means. I also hope we keep the higher savings rates that have come back in, like back in the 50s, but we are too eager to spend to every get back there..
I do not think we get back to that for awhile as we have to clear out the bad real estate and reestablish our work force and reduce the debt burdens.
But before the workforce will come, the states and the Federal Gov't will have to start living in their means. My guesstimate is that this takes 5 to 8 years to
A) consumers and banks get through the bad real estate and debt
B) get the gov't to be more lean
C) raise enough tax revenue to pay off debt through a combination of spending savings and tax rate increase back to the more normal but histocially low ones of the 1990s.
D) develop a plan to reestablish a new infrastructure plan that makes sense.
E) workforce gets paid fairly both on the low and high end.
Until then, everyone needs to live in their micro economy, their household or business budget. Don't borrow money for consumer purchases. No credit cards. Budget and spend what you can afford. Food, Shelter, Educations first, then treat yourself afterwards. Make that your normal and it does not matter as much as to what the Macro Normal will be.
The party was great, but this hangover will take more than 2 aspirin and some sleep. It will take sacrifice to get over this one.