Exhausted after the Christmas holiday?
It is always surprising to see just how tired people look after the Christmas holiday. The very idea of a holiday is that you rest. None of us do that though. We all hurry round from family to friends in a mad dash to see everyone we know and to stock up on as many calories as possible. What we should be doing is taking it easy so that we can get our strength back so that we can make it through the dark months ahead.
Economically speaking of course, the last few months (years, indeed) have been very dark indeed. It was surprising to see just how few shoppers there were in the US stores over the Christmas period. This is in the land where the consumer is king and yet the Simon and Garfunkel song, ‘The Only Living Boy in New York’ seemed more appropriate in some stores. This song itself contains the following line:
“I get the news I need from the weather report. Oh yes, I can gather all the news I need from the weather report.”
Indeed, there were times last year when limiting yourself to the state of the weather would have made you a much happier person. (Unless you live in the UK, of course!)
The gloomy news continued until the end of the year with Sears and Kmart announcing the closure of 120 stores on December 27th.
Companies created during recessions
So, if all of this is making you a bit depressed, you might be interested to know that recessions can bring with them opportunities as well. In fact, many great organizations have been born amidst economic chaos. Here are some examples that you may have heard of.
FedEx began trading in 1973 at the very beginning of the first Oil Shock that plunged the world economy into a deep recession. Two years later, with the economy still in dire straits, Microsoft was founded by the world’s best known university dropout, Bill Gates. Both companies are among the most widely recognized and respected today.
CNN was created in the deep recession of 1980. By most estimates, this recession lasted 5 years at yet in 1981 another TV giant, MTV Networks, was born. Both stations are watched by millions of people today.
Going back a little further we can find that The Hyatt Corporation and Burger King were founded during the economic downturns of the mid-1950s. Hewlett Packard (HP) was created towards the end of the Great Depression and finally GE was established in 1876 during a six year recession that had begun with the ‘Panic of 1873’.
Optimism and the economy
Knowing such things is important because it might give us a little hope. Optimism is more than just than just a nice thing; it makes a difference to the economy. People tend to spend money based not on what their actual financial situation is, but rather on what they think it will be like tomorrow. This is known as ‘The Wealth Effect.’ If I think that I may get a promotion soon, are that my business will expand, I will start buying more goods or services. I may look for a bigger car or treat myself to something I have wanted for a long time. This in turn generates work and more money for other people. So if we want the economy to improve, we’re going to have to find some reasons to be cheerful. One thing most economists agree on is that you can’t save you way out of a recession.
2012: A year of change
2012 will undoubtedly be a year of adjustment. 3 of the world’s top 6 economies (USA, China and France) will have changes of government this year. It may even be 4 given that Japan has got itself into a spiral of changing Prime Ministers nearly every year (it is on its sixth since 2006!). This inevitably causes some doubt.
However, there are signs that world economies are beginning to pick up and new governments tend to galvanize themselves into action that can have positive economic effects. In other words, this year may just bring us some reasons to smile a bit more.
“The best is yet to come”
I have a good friend who is a great fan of Frank Sinatra. Fittingly, he signs his emails with the title to one of his iconic songs:
“The best is yet to come.”
He has been doing it for years and when I think about it he has always been right. Sometimes, it is a question of what you make it. Perhaps we’ll just have to try a little harder in the coming months to make this prophecy come true.
Western economies have gone through more than 40 recession periods since 1800. The good news is that things always come around in the end. If this recession has finally bottomed out, then 2012 may just finally give us a little encouragement.
Have a very happy, healthy and successful 2012!
|Excellent advice taken from Lorange’s business and academic career.||An excellent history of finance. Easy to read and lots of interesting examples.||Wonderful essay that lays out the benefits of international trade.|
13 is an unlucky number in many cultures. If you are of the superstitious disposition, then 2013 may not seem like the best possible year for you. Rather than spending twelve whole months avoiding black cats or trying not to walk under ladders why not accept that you will get you share of bad luck in the coming year. Indeed, it might even be better to take a proactive approach. Go looking for as many failures as possible. This could be the fastest route to success. Ask Michael Jordan.
I have just finished my classes for the semester in Strategic Management. As I did my fifteen minute wrap up of the course, I announced some interesting news to my students. Just three weeks ago, Michael Porter’s company, the Monitor Group, had declared bankruptcy. It is a rare treat to subdue a group of enthusiastic business students but their stunned silence was fascinating to watch.
At the AACSB Associate Deans conference, Karyl Leggio, Dean and Professor of Finance at the Sellinger School of Business at Loyola University Maryland, led a fascinating discussion on the issues in setting up new programs. The topic of the presentation was centered around generating revenues and “managing costs by benefitting from revenue sharing initiatives.” Given that we are now into the fifth year of the financial crisis with no easy end in sight, this is an important subject to address.
There is a rumor going around Washington DC, that there was some kind of election last week. Things are back to normal now with college students practicing their football plays in front of the Capitol. Just in case you missed the election the results can be summarized as follows. $6 billion dollars spent, nothing changed. But that is just the point; sometimes the status quo is the best option. It is having the possibility to choose that counts.
Organizations and Markets: “Ronald Coase has a short piece in the December 2012 Harvard Business Review, “Saving Economics from the Economists” (thanks to Geoff Manne for the tip). Not bad for a fellow about to turn 102! I always learn from Coase, even when I don’t fully agree. Here Coase decries the irrelevance of contemporary economic theory, condemning economics for “giving up the real-world economy as its subject matter.”
Booz & Company: “Oded Shenkar, author of Copycats: How Smart Companies Use Imitation to Gain a Strategic Edge, introduces an excerpt on the wisdom of entering markets after first movers from The Art of Being Unreasonable: Lessons in Unconventional Thinking, by Eli Broad.”
International Affairs in Higher Education