*Unemployment in the U.S. (and many other countries) is at a 25-year high
*An average of 40% of wealth has been lost by investors around the world
*Consumer spending is down almost everywhere
*Federal Interest rates are close to 0%
The gloom-and-doom is getting serious, people. Are you all ready to go down in the storm shelter and start putting gold under the mattress? Hopefully not, because we have something important to talk about today.
I’m not trying to make light of hardship in any way. I’ve previously explained that the recession sucks. All of us have been affected one way or another. If I had the choice, I’d prefer to have 15% gains for no work every year. Bring back the bubble!
The problem is, that’s not how it’s working at the moment. We’re running into the reality that the world as we know it has changed, and like it or not, we must change with it. That’s why I wanted to ask the question:
What’s the contrarian perspective on the recession? What should we be excited about during this time?
As best as I can, I’ve tried to capture it here. See, I want to get away from the gloom-and-doom perspective of the news. I honestly think there are a number of really good things about this situation we are in.
(I also think, however, that the choices we make now are critical to how well we will each come out of the recession – but stick with me, we’ll come to that.)
First, let’s look at the obvious. Here are a few basic, good things about the recession:
Inefficient businesses will cease to operate. When consumer spending tightens up, customer service that sucks doesn’t stay around very long. A store in my new neighborhood just put up signs that they are going out of business after 28 years. Am I sad? Not really – the first time I dropped in, I found it overpriced, rudely staffed, and with nothing compelling to sell. I left thinking, “How have they been in business for 28 years?” Well, I don’t know exactly… but I know they won’t be there next month.
Good businesses will thrive. On the other hand, a tough economic climate forces businesses to bootstrap and get serious about value. Everything comes down to perceived value, and companies know they have to compete better. For example, I called Verizon the other day to ask about a cheaper rate – and it took about 30 seconds for the rep to offer me $40 off my monthly bill without any loss of service. I had been thinking about going to a prepaid service, but not after that offer.
Young people, and presumably investors of all ages, now know that investing in the stock market involves risk. Sometimes the stock market goes up, but sometimes it crashes dramatically. We’ve all known about risk for years, but for my most of my generation’s lifetime (I’m 30, so this certainly includes everyone younger than me too), we’ve been told over and over that the stock market is the safest long-term investment. Is it still? Perhaps, but it’s good to know that the risk is very real.
Those things are true, and I’m sure there are other observations… but I think the best thing about the recession goes much deeper than the initial effects.
As I see it, the best thing about the global economy falling apart is that it forces us to take a look about some core issues we often ignore.
The core issues are values and deeply-held beliefs about security. This is going to be challenging for some people, I know, but just like the story of a professor who is willing to fight the system to his own demise, I also know that many of you will appreciate it.
On a basic level, we may choose to rethink what is important to us. When I asked about this last week on Twitter, several people said they are spending more time with their family and friends. Others mentioned a return to the simplicity movement or just “living well with less.”
On a deeper level, the change goes further as we are forced to re-evaluate some of our most ingrained beliefs. This is probably the most challenging thing to let go of, because when a belief is deeply-held, it usually means it has been internalized through repetition and by numerous authority figures.
Some of the beliefs that are being openly challenged during this difficult time include:
We can have everything we want at the same time. Don’t get me wrong — I believe we can usually do anything or have anything we want… I just don’t think we can have it all at the same time. Lifestyle design is all about making deliberate choices, and many of those choices involve forfeiting something to receive something else in return.
All we have to do is save regularly for 40 years and then we can retire. This may still work for some people, but not others. The people who invested heavily in financial stocks or with Bernie Madoff have seen their savings obliterated. Sure, we can blame them for making poor choices, but the choices were hardly unconventional. The stock market worked for a long time. You put money in and took out more money later. Even portfolios that were “properly” diversified have seen tremendous losses recently.
(Side note: I’ve always been troubled by this particular belief, even when it seemed to be true. My objection is “It that the best we can do? Spend the most productive years of our lives toiling away in hopes that we can have fun in the final years?” Now that this is no longer a guaranteed safety plan, I think even less of it.)
Taking on debt is normal and healthy. Until recently, taking on a large amount of debt was socially acceptable, and sometimes even fashionable. When I would talk about how debt is a chain around our necks that drags us to the bottom of the ocean, the room would get quiet and I learned to keep my opinion to myself. Now, I don’t need to say it, because for the most part, the belief that debt is unhealthy is now fairly conventional.
Traditional employment is safe. Working for the man may remain conventional, but you can longer assuredly say that it is safe. Again, I know that some people will be uncomfortable with this, but I’m trying to help. I’m not saying everyone should go out and quit their jobs (although it’s not a bad idea for some). I think there is at least as much risk involved with working for someone else as there is in working for yourself. The way things are now, I don’t see how anyone could continue to claim a correlation between employment and security. This is why it is even more important than ever to create our own security and independence.
Someone (else) will always get us out of this. Much of the U.S. population, and by extension much of the world in general, is seemingly waiting in hopes that someone, somewhere will solve the problem and take care of us. This is wrong. No matter whose fault this situation is, we have to get out of it ourselves… which brings us to the most important part of today’s conversation.
When presented with a major challenge to our worldview, how should we respond? Regardless of our own individual situations, there are essentially two possible responses. You can clearly see the first, most common response on display around the world right now. The second, however, is the only one that will help us get through this intact.
Response #1: Complain About Other People
If you want to be mad at someone, you have plenty of targets. Here are a few that have been coming up recently:
- Those damn subprime lenders
- Those people who bought houses they couldn’t afford
- Bernie Madoff
- Alan Greenspan
- The Bush Administration (+ Gordon Brown, Stephen Harper, etc.)
- The Democratic bailout
- CNBC, James Cramer, et al
- The credit card companies
Complaining about these people or entities is a socially-acceptable choice. You can find a picket line or Facebook group for any of them. Furthermore, none of the complaining is really unjustified. Yes, the executives at AIG are greedy barons who don’t deserve million-dollar bonuses for screwing over their company. But… what does that have to do with you and me?
See, you can pick your own breed of scapegoat, but at the end of the day, the way you feel about any of them will not make your life any better. Complaining does not put the money back in the 401k account or recreate the 4.4 million jobs that have been lost thus far in 2009.
Sorry. But cheer up, because there is some (much) better news in Response #2.
Response #2: Change and Adapt
Spend a day or whatever times it takes to complain about the scapegoat of your choice. Then, get over it. Let it go, and think about the life you really want for yourself. Are the scapegoats part of your ideal life? I’m guessing probably not, so why bring them in?
Instead, acknowledge that the world is different now. Acknowledge that some of the things we’ve believed were not true. The rules have changed. You can still make it out there, and you’ll be better off than you were before.
The primary change required of many of us during this time is to shift where our focus lies. Is it external or internal?
If you chose to focus externally, you think about all of the people who screwed up to get us where we are now. (See the scapegoat list and pick your favorite.) You wonder what will happen next. Will the market recover? Will Obama’s plan work?
If you chose to focus internally, you think about what you can do to create your own independence and you get to work on making it happen. Instead of wondering, you decide what will happen next. What will you do regardless of market conditions? How will you get what you really want?
One of the best things about the recession is the radical opportunity for change and growth. You can use this time to start a very small business. You can discover what you’re really good at and put those skills to work helping others. You can be remarkable in an unremarkable job, and find a reason to show up every morning.
You can completely change the trajectory of your life, and when people ask you later when it happened, you can say, “Well, it happened during the worst economic crisis of my lifetime…”
The process of change is usually a painful one. But fear not: the same kind of pain produces growth and change, if we are willing.
Listen, I know it’s hard out there. I haven’t opened up the champagne here at World Domination HQ. But I also feel strongly that this is a time for dramatic personal growth. Most people are going to complain and wait for someone else to help them. The rest of us will change, adapt, and succeed in the new land of opportunity.
I want you to be one of the ones who changes, adapts, and succeeds. I want you to make it. If you’re in, here’s something to think about:
One year from now, where will you be?
My theory on where you’ll be in a year has nothing to do with AIG, Barack Obama, James Cramer, or the closing price of the S&P 500.
IT HAS TO DO WITH THE CHOICES YOU MAKE BETWEEN NOW AND THEN.
I’m not thrilled about losing 40% of my savings, but if that’s what it takes to grow and change for the better, I consider that a reasonable price to pay for freedom.
What is freedom worth to you? Where will you be one year from now?
Thanks to several friends on Twitter for helping out with the brainstorming for this article:
sciencesays scottquitter TriExpert globtrav mkf1031 summerae ericschiller samdaams donpinger s_vonschilling timbursch MartiMeersman andrea_r doubledanger AlanPerlman evandeaubl metroknow darrickjlee Kazimor pederhanson NathanBowers megmoir KevinEBlake victoriashmoria brooksnt nhangen bSquared13
If you haven’t connected with me over there yet, come and hang out! It’s fun.