Thursday, October 2, 2008

3 Epochs of business, and now a 4th?

I feel as though my business has survived through 3 different epochs.

The first was the hardscrabble 80's.

The second was the growing population and competition of the 90's.

The third was the go-go 00's (up to now.)

I think we're about to enter into a fourth epoch.

If you had asked me a year ago, I would have told you we're likely to slide back into the 90's era type business climate. With the excess gone, but a still viable economy.

Instead, I'm beginning to wonder if won't resemble the 80's more.

My experience with the 80's was -- it was a very hard time to survive. Most of the businesses I knew of were very down to earth, very common sense. There wasn't a lot of fluff. There weren't a lot of silly businesses. Everyone was just getting by.

If you wanted to advertise, you thought long and hard. It was more a "use it up, wear it out, make it do, or do without" kind of atmosphere. You didn't buy yourself a new car and put your business logo on it; you tried to find used fixtures or built them yourself. You didn't renovate anytime you felt like it; or eat out much; or buy unnecessary luxuries.

What I remember about the occasional 'high end' businesses that would come to downtown, is that they would open with a certain amount of arrogance, of showing the poor benighted locals what a first class store looks like, and then an inevitable realization that it wasn't happening, resulting in a sudden disappearance into the night, or a sort of half angry/half dismayed complaint, and a withering away.

No one was getting rich. Everyone was just getting by, and that was counted as success.

I'm not sure people are ready for that again.

6 comments:

RDC said...

Definately a paradigm shift in action.

I think americans are going to learn the benefits of being frugal and saving again.

Michael said...

I think we'd all be well served to start using the word depression. What will be bitterly funny is the federal government will declare a recession and follow it up a week later with the depression.

I've been doing a little too much research into written first hand accounts of life during the 30's. Words fail me in trying to transpose our current society with the level of sacrifice required for families to make it back then.

Throw some heartfelt wishes into the wind for some kind of economic miracle. The 700 billion bailout will be our sole shot at diverting catastrophe and we are blowing it on making the casino solvent. Too bad we never knew they were gambling with our future.

Michael said...

Good time for books about hard times and farming, hunting, survival skills, basic economics, basic first aid etc...

RDC said...

I do not think that it will reach the great depression stage. That was a 25% unemployment rate.

The impact of FDIC insurance will prevent one of the major blows which was loss of savings in bank accounts. Also keep in mind that the great depression coincided with the dust bowl. A lot of the issues then were greatly increased by the dust bowl and the relocation of families from the plains areas.

By the Bernacke has studied the great depression in depth. He probably knows as much as anyone of exactly how it came about and the mistakes made.

Michael said...

RDC,

I have read your comments and always found them reasonable and articulate.

Bernanke is an expert on the great depression but each depression has different causes with the same human effects. Bernanke is facing an entirely new crisis centered on the unregulated and opaque derivatives market.

My simple understanding of economics points toward a continuing decline in jobs and the next stage of individual deleveraging picking up speed. More personal defaults will lead to increased capital requirements for the banks. Less capital will impact with less lending. The negative feedback loop will continue. Our fractional reserve system has shown its strength in creating this country, it is now showing its weakness.

Unemployment coupled with a declining GDP, continued credit tightening and the inevitable increases in tax rates will continue to force contraction in our economy. We will all live simpler lives, only it will not be of our choice.

Ran across this look at the depression of the 1870s.
http://chronicle.com/temp/reprint.php?id=477k3d8mh2wmtpc4b
6h07p4hy9z83x18

RDC said...

Oh I expect that we will top 10% unemployment as an average across the US before this turns around. I do not think that we will go over 15%. Even the lower number will be painfull.


In both cases the issue is credit and being over leveraged. Both on Wall Street and on Main street.

Then you had unregulated areas, today you have unregulated areas. The primary difference is that today the areas that were unregulated then are regulated and the protections for main street such as FDIC insurance. So the end result is that a far higher percentage of the economy is protected in some fashion then during the great depression. Also we are not launching into a trade war, with restrictive tariffs at the same time we are deleveraging. That was the final straw so to speak back then. also we are not facing the dust bowl in the great plains (the third strike)