Economics & Research Blog
Are We There Yet?
What if there was no stimulus package,
By Dr. Joe Webb
Published: February 4, 2009
What if there was no stimulus package, and the economy started improving all by itself? It could happen. One of the more interesting economic incidents was the Panic of 1819 where President Monroe basically did little, the marketplace sorted things out, and in about three years, things righted themselves. One of the surprises to many of today's reporters, and indeed even Senators and Representatives, is that the bulk of the proposed stimulus plan that passed the House could not be started until 2010 or later. In the meantime, the marketplace is all there is. The Federal Reserve is doing what it can (and sometimes shouldn't), but the standing around waiting for government action is actually seizing up markets that want to right themselves. The Fed, and the government have created a situation where there is no reward for savings (interest rates are very low) and anyone who wants to borrow has no idea what the value of the assets that would be used as collateral really are. We've been fighting a banking crisis of one sort or another for 18 months. I have already proposed my own stimulus plan, which I still believe is what we need. But what I suggest matters little, of course.
I believe the lowest point has passed, but climbing out is going to be quite a while. There will be very bad employment news on Friday, most likely, as most of the company downsizing occurred after they closed the books on calendar 2008. It's important to keep the bad economic news in perspective. The press has good reason to keep focusing on bad news to get ratings and sell papers, and their own worries about ad revenues. Nonetheless, some of my recovery indicators as noted in this week's newsletter have improved.
The press also is focusing on wrong things. Among my favorites are executive pay (it's the Board of Directors problem), and limiting it has unintended consequences on employment, philanthropy and tax collections. It will also be an incentive to keep companies private, rather than be publicly traded, limiting the number of people who could benefit from a successful business to the small number of owners. The demand that companies stop having “junkets” or events in destinations like Las Vegas does nothing to hurt the companies, but negatively affects the employment of the lowest-paid workers at those locations most. In the first rounds of cuts, the busboys and housekeeping staff go first, because their jobs are the closest to the first downward shift in demand, and there are numerically more of those jobs than there are supervisors. Everything is connected, in ways that cannot always be seen at first glance.
In the meantime, we are still businesses that must find unique ways to survive. Keep your clients needs in mind; many of them struggling with the same ideas. Small retailers need to build traffic. Restaurants need to get their chairs and tables filled with customers. Car dealers need to move inventories. Every business needs to convey a valuable, unique, and innovative selling proposition to a target audience that moves them to action. Few of these businesses, especially the small ones, have a capability to implement campaigns of any type. Sometimes, they do not have budgets.
We often hear about “thinking outside the box.” I never liked the idea. I always thought it was more interesting to just find a new box, and ditch the old one. The way we sell, and who we compete with, and what makes us attractive to clients is always part of a box that exists for a reason. We want a box. We have to give people a reason to pull our box off the shelf rather than another one. Get a new box, and fill it with reasons. Those reasons are new ideas.
There may be situations where you may have to get past the risk a client sees in starting a job. If you're dealing with a small client, getting paid for every response they get, or every new customer, or some other desired act, might be the way to get over the cost hurdle. People do not engage in any communications transaction unless they have a reasonable certainty that they will receive more benefit in revenues or activity than the cost and time to put it together. Remember, it's not always dollars; time is the least available resource and it is not renewable.
This fact is the prime reason to get involved in creating outsourcing services, such as data base building, sales lead development, inventory and fulfillment, and numerous others that one can imagine, are so important in recessions. Clients need to cut their total costs, but they cannot always eliminate functions or tasks. This is why outsourcing exists: when companies concentrate on their core functions, it means that they are willing to send non-core functions out to other providers. If clients are cutting back, ask where. Ask who will do those tasks now. Find out what you can do to take the tasks on.
This is an excellent time to transform a business. Rather than waiting around for a stimulus package, you have to make your own. Don't let the economy transform you. Create opportunities, and don't wait for them. Build a new box.