Wednesday, October 1, 2008

Thriving in a changing economy, understanding the economic upheaval


By David Gewirtz

Many of you know that some years back I wrote a pretty well-received book called The Flexible Enterprise, which was all about how businesses can manage and thrive in a changing economy. Over the past week, I've gotten a bunch of letters from readers asking about how all the economic fuss we've been experiencing will affect their jobs, their businesses, and the world of tech.

I've talked to a lot of concerned and confused people. It doesn't seem to matter whether you're an employer or an employee, an American or someone outside of the U.S., the economic wackiness all across the world is making everyone a bit nuts.

"The way businesses smooth over the sine wave that is cash flow is by using credit."

I'm not going to be a Pollyanna and claim everything's hunky-dory. But I can share with you some background that can help you understand the situation better. I can also provide some coping strategies that will help you make it through this thing and come out solid on the other side.

I've seen so many blog posts and articles that basically claim the financial End Times are upon us, everything's going down the tubes, and there's no coming back.

I completely disagree.

No, I'm not just claiming the fundamentals of our economy are sound. Instead, I suggest you just look around. There are real, tangible assets the world over. I don't need to itemize them all, but there's a ton of real, physical items of value in the world. No matter how it's mortgaged, a house has intrinsic and real value. No matter who owns your loan, a factory that can turn out goods is a factory that can turn out goods.

Here in the United States, we have a tons and tons of real, tangible assets. These things all have value and, in a society where there are a lot of items of value, you have an economy. That's just how things work.

Understanding the bailout

Regardless of what you think about the causes of the subprime mortgage mess, or even whether you're pissed that Congress over-porked the bailout bill (Wooden arrows? C'mon!), the real issue concerning all of us was availability of credit and consumer and employer confidence.

Most businesses rely on credit, not because they're bums, but because business cycles require it. For example, your employer might get paid in 90 days for work you do today. You, on the other hand, don't want to wait three months for your paycheck. You want to get your paycheck Friday, and then every two weeks.