Recently, I have had two dramatically different conversations with two different business owners. The first one said, in part, "just think about the number of people they are talking about being unemployed." I replied that I choose not to think about that; I choose to just keep on forging ahead. In the second conversation, another business associate said he was operating like the current economic environment represents the opportunity of a lifetime.
That is the theme of this article — and the point of view that I choose to adopt — the current economic climate represents the opportunity of a lifetime. This is not intended to be smug or insensitive or ignorant of events going on around us; it is a conscious choice to focus on the things that I can control.
The daily dose of negativity in the news media makes it appear that we are headed for Armageddon. The press seems to always find a cloud behind every silver lining. However, one can understand this negative bias by recalling a statement that a seasoned news veteran supposedly said to a rookie, "We don't do stories on the banks that don't get robbed, the cars that don't crash and the houses that don't burn down."
There is no question in my mind that the press, in its negativity, is actually making the situation worse, or as the saying goes, "What we fear, we draw near."
"If it bleeds, it leads"
I have had first-hand experience with negative news reporting. A few months back, I was contacted by a reporter who was doing an article on the impact of the economy on small businesses. I told him that we were being careful to watch our expenditures. While we had lost some clients and prospects, we were working hard to maintain our sales funnel, and things were going well, all things considered. He sent me a draft of our interview, which accurately reflected our conversation, and thanked me for my time. When the article came out, there were several examples of companies experiencing pain, all of which were uniformly negative. His write-up of our conversation was not included. I contacted the reporter, and he told me that his editor had cut our piece because of space.
Apparently, there was no space for anything positive in an otherwise completely negative article
The negativity in the press seems to revolve around three themes: (1) the economy is in a shambles, (2) the politics of divisiveness and class-strife between the haves and the have-nots is worse now than ever and (3) the overall world economic and political situation is a powder keg ready to blow.
In other words, the press would have you believe that Things Have Never Been This Bad!
People sometimes express dismay about how divisive and polarized our current political environment is, about how bad the economy is and how bad the world climate is. There have been articles written on the divisiveness of politics — but I prefer to call it the politics of divisiveness — and of negativity.
We have such a short memory. Remember the Chicago DNC, 1968? Police were openly beating American protesters on the nightly news. Remember Kent State, 1970? We had National Guard troops firing on American college students. Four were killed, including two that were merely walking between classes. Remember 1963 and 1968? Those years saw assassinations of JFK, MLK and RFK, respectively.
This was Americans beating and killing other Americans — right in our streets and on our college campuses.
Let's look at a few more highlights (or I should probably say lowlights) of the last 50 years or so. As you look at each item, reflect on what each one represented in terms of not only the socio-economic climate of the day, but the larger issue of civil strife at home and armed conflict abroad. This list represents an arbitrary collection of social, political and economic crises.
1962. Cuban missile crisis. The entire United States is put on "red alert" for nearly a week, one button-push away from the BIG ONE.
1963. Assassination of President John F. Kennedy. The KGB, Cuban exiles and even the CIA are suspected.
1965. Watts riots in Los Angeles. In the course of six days, 35 people are killed, 1,000 injured and 4,000 arrested.
1967. Detroit riots. At the end of five nights, 43 are dead, 467 are injured, over 7,200 arrests are made and more than 2,000 buildings are burned down.
1968. Assassinations of Martin Luther King (April) and Robert Kennedy (June) and the Chicago DNC riots (August).
1970. Kent State University. Four students are killed by Ohio National Guard troops. This becomes the subject of the famous Crosby, Stills, Nash & Young protest song, "Ohio."
1970. More than 450 college campuses around the country are shut down by student strikes by more than 4 million students.
1972. Eleven Israeli Olympic athletes are kidnapped and murdered in Munich, West Germany, by terrorists.
1973. OPEC oil crisis. The price of oil quadruples virtually overnight. Remember those long lines at the gas pump?
1973. Stock market crash. The Dow Jones average loses 45 percent of its value. The London Exchange loses 73 percent of its value.
1974. Resignation of President Richard Nixon, stemming from the break-in at Watergate 2 years earlier.
1959–1975. Vietnam War. There are millions of casualties, including 58,159 American dead, 2,000 MIAs and 303,635 wounded.
1979. Russia invades Afghanistan. The U.S. begins to support Arab resistance groups that eventually evolve into al-Qaeda.
1979–1981. Iranian hostage crisis. Fifty-two U.S. diplomats are held hostage for over 444 days.
1980. The Prime Rate peaks at 21.5 percent. It stays above 10 percent for over 7 years.
1982. The U.S. unemployment peaks at just under 11 percent. It stays at or above 7% for nearly 6 years.
1983. The U.S. Embassy is bombed in Beirut, killing 63 people.
1983. Korean Air 747 is shot down by Soviet jets over the Sea of Japan. All 269 on board are killed. The flight originated in New York.
1984. Famine in Ethiopia kills 1 million people.
1985. The M.S. Achille Lauro is hijacked by Palestinians. A wheelchair-bound American tourist is murdered and thrown overboard.
1987. Black Monday. Stock markets around the world crash. The Dow Jones drops by 22.6 percent, the largest one-day drop in history.
1989. The Resolution Trust Corporation is formed, eventually closing 747 savings and loans with total assets of $394 billion.
1990. Saddam Hussein invades and occupies Kuwait, which leads to the "first" Gulf War. The price of oil more than doubles.
1993. First World Trade Center bombing. Six people are killed, over 1,000 injured.
1995. Oklahoma City bombing by domestic terrorists. One hundred and sixty-eight people are killed, over 800 injured.
2000. The Internet bubble "bursts" — a.k.a., the "dot-bomb" — resulting in massive layoffs and business failures.
2001. 9/11 terrorist attacks. It represents the first time America was attacked successfully on its own soil since Pearl Harbor.
When you look at the long list above and ponder deeply about what these events mean — in the context of economic, social and political terms both then and now — one certainly doesn't long for "the good old days." Americans killing hundreds of other Americans in the streets. Double-digit prime rates and unemployment above 7 percent for over 5 years. These were incredibly challenging times ... and amazingly, we lived through them.
And we will live through these times as well.
How to Lie With Statistics
One of the main sources of the scary economic news these days is statistics. While in grad school at Stanford, I took a course in advanced statistics. One of the textbooks was a small paperback titled, "How to Lie With Statistics." With chapters titled "The Well-Chosen Average" and "The Arbitrary Graph Scale," it highlighted the many ways statistics can be used — and abused — to prove a point.
It's very risky to play around with statistics, especially when taking percentages of percentages. Take unemployment. It has been hovering between 5 percent and 6 percent for the last several years. It currently stands at 8.1 percent. What is the difference between 6 percent and 8.1 percent? Well, it's 2.1 percentage points. That means that for every 1000 employees, precisely 21 more people are currently unemployed than there were a few years ago. But if you look at the percentage increase of the unemployment percentage, it's nearly a 35 percent increase. It's this latter comparison that is typically reported in the press. But that's a percentage of a percentage. Compared with the number of people employed, a few years ago, there were roughly 940 people employed out of 1000, and now it's more like 919 out of 1000 workers employed. That's a much less dramatic difference.
(However, it is important to note that if you are unemployed, it doesn't matter if the unemployment rate is 1 percent, it's still very bad for you.)
To give an idea how negative news leads to negative thinking, a recent poll reported that upwards of 50 percent of adults surveyed were concerned about losing their jobs. If you believe some of the estimates that have unemployment peaking at around 10 percent, then the survey shows that nearly five times that number are fearful that they may become unemployed. But that's not accurate either. If the current unemployment rate is 8.1 percent and it peaks at 10 percent, that means roughly 1.9 percent more people may become unemployed. Yet 50 percent of surveyed adults are worried about it. That means for every one person who actually might get laid off, 25 more people are concerned that they might be laid off. I wonder where those other 25 people got that concern.
Job losses are another commonly reported — and alarm-raising — statistic. Recently I have seen headlines saying that job losses are higher than any time since World War II. What those same sources fail to report is that the number of people employed is also higher than at any time since World War II (or at any other time, for that matter).
Some good news
So what are some positive things currently going on that are being ignored and/or under-reported? Here is a sampling:
- Gas prices are half what they were last year. This has a huge positive impact on consumer spending.
- We are also driving less, which means less stress and strain on our nation's roads and bridges. This also means our cars will last longer. While that's not good news for the auto industry, it is good news for struggling consumers and families.
- Lower gas prices should also help keep costs down for transportation-centric businesses such as airlines, trucking and shipping businesses.
- Oil prices are down from last year by well over 50 percent. Recall that oil provides the feedstock for hundreds of products, from food containers to medical devices. So this will reduce raw materials costs for many manufactured products.
- The trade deficit is lower than it has been in years. So we are sending less money overseas, sometimes to countries that are not favorably disposed to America.
- While it is true that unemployment has increased, it also means there are good employees out there for those firms who are fortunate to have job openings.
- Interest rates are at a historic low. If you are financing or refinancing a major purchase, you can lock in very low payment terms for years.
- The U.S. consumer savings rate is much higher than it was even six months ago. That's not good for consumer goods and businesses that are dependent on discretionary spending, but it is a sound financial principle that is good for households — and eventually good for the economy.
- Both the stock market and real estate have lost a significant amount of value. That means these assets are increasingly becoming a better value for prospective purchasers. In spite of what you typically read in the newspaper, there is a lot of cash sitting on the sidelines, waiting to enter the market.
And going back to our historical list above, what are some of the positive events that started or occurred during some of those extremely challenging times? Here is a small listing:
1962. Warren Buffett begins buying stock in Berkshire Hathaway, a small textile manufacturer in New Bedford, Mass.
1968. Intel corporation is founded.
1969. The "Internet" is launched with four nodes: UCLA, Stanford, UC Santa Barbara and the University of Utah.
1970. The first commercial 747 takes off. Boeing expects to sell about 400. It has exceeded that number by four times.
1973. Federal Express is launched.
1975. Microsoft is founded.
1976. Apple and Genentech founded.
1980. Cable Network News (now CNN) is launched.
1981. The personal computer, or PC, is launched publicly by IBM.
1982. Sun Microsystems and Compaq Computer Corporation founded.
1983. The Justice Department breaks up AT&T and the telecommunications revolution begins.
1984. Michael Dell begins selling IBM PC "clones" out of his dorm room at UT Austin.
1989. The Berlin Wall comes down.
2001. Wikipedia (and QSE) founded.
The significance of these events is this: every one of them occurred in the midst of significant economic, political and civil strife, and each one represents visionaries and idealists who set aside — and largely ignored — the concerns bombarding them from all sides. Then, they did those things necessary to overcome or mitigate those outside events and circumstances.
As Zig Ziglar says, "Business isn't out THERE, it's in HERE" (pointing to his head). Smart people agree.
Mr. Jenkins (marion.jenkins@qsetech.com) is CEO of QSE Technologies, Inc., which provides information technology consulting and implementation services for ASCs, MOBs, specialty hospitals and other medical facilities nationwide. He can be reached at (303) 283-8400.