The New Economy: Record Collapse Promotes Long Term Vision and Principled Practices
Posted: Monday, May 04, 2009
by Jeff Brown
Inner Projection
Before the New, Let's
Take a Look at the Old
If you think used car salesmen and politicians take a hit
when it comes to credibility, just think how the general public views business
executives today. It was bad enough before 2007; they used to be down there
with salesmen and politicians, but in the current economy now they're crawling
beneath both hoping for a second chance.
But exactly how bad was the disaster? Where has business
economy growth been hit the hardest and where is it surviving? What are the
economy facts?
The big, bad economy news, according to Fortune 500, is that of those companies on the list you have seen
your 401(k) drop by 37%.
The earnings of the 500 was much worse, a collapse of 85%.
128 of the 500 have posted losses for a total of $519
billion.
Some companies that were high on the list in 2007 have not only fallen off but
don't even appear in the top 1000 in 2008. Those of the market economy hit the hardest were
banks and securities and consumer cyclicals:
|
|
500 Rank 2007 |
1000 Rank 2008 |
|
Bear Sterns |
156 |
Not in top 1000 |
|
Countrywide Financial |
104 |
Not in top 1000 |
|
KB Home |
340 |
682 |
|
National City Corp |
226 |
Not in top 1000 |
|
Wachovia |
38 |
Not in top 1000 |
|
Washington Mutual |
97 |
Not in top 1000 |
(Fortune May 4, 2009)
Some of the top money losers in 2008 were some of the biggest money makers in
2006-2007:
2008 Loss: AIG (-$99 billion), Fannie Mae (-$58.7 billion), Freddie Mac (-$50.1 billion), Citigroup
(-$27.7 million), and Merrill Lynch (-$27.6 million)
The sectors hit the hardest were
the biggest winners from just a few years previous. Banks, securities firms,
and insurers took the biggest dives. In 2006, all three combined to post
profits of $257 billion, about one third of the total 500. In 2007 they lost
$213.4, a $470 billion fluctuation. That's 70% of total dollar loss.
Because of this big loss, now
consumers are reigning in their purchases that's why consumer cyclicals, or
those things people can go without, have been one of hardest hit sectors.
Cyclicals fell from $38 billion to -$42 billion, an $80 billion difference.
Some of the hardest hit cyclicals were automakers, hotels and casinos,
publishing, and home builders.
But it's not all bad news, for if
it were the economy would come to a standstill. Those sectors actually
maintaining marginal profits are health care and technology. Those sectors
maintaining the status quo or taking slight losses but still breathing are
basic materials, capital goods, consumer staples, energy, and utilities.
Outside of corporations the others
responsible were consumers. Because of lack standards, for example verification
of income, home buyers were overstating just to get a foot in the door on loans
they couldn't afford. Many also took out a second mortgage, borrowing money to
pay for vacations, cars, and remodeling in the process building greater and
greater debt. So it was a gluttonous attitude in the private and public sectors
combined that contributed to toppling the economy.
The New Economy
Big business flinches now considering
that the government will be more involved in monitoring corporate activity.
However, if CEO's know what's good for them, the pressure from the general
public will be enough to inspire them to keep their collective noses clean,
setting greater restrictions upon themselves without government intercession. But
it's not all bad news.
Consider that when things are going
well, no one's willing to venture out to look at new ideas, options, or
opportunities. As the saying goes, if it ain't broke why fix it? However, with
great disaster comes a greater desire by consumers to look at options. It's a
great opportunity for old or new businesses with unique products and services.
We've seen the bubble burst, but now there's an opposing bubble with profits
and prices going down. And when this bubble bursts-for after every down there's
an up-those companies, old and new, that are positioned properly, espousing
principles, ideas, and concepts the New Economy desires will profit
considerably.
Now is the time consumers will
break from the norm looking for the new. They will be more open to looking at
products and services and businesses that preach principle and ethics over
gluttony and sloth. People will desire to go green, cut back on unnecessary
spending and look to get by on more with less. It is the perfect time for invention,
coming forth with the new and the principled.
As business owners today more than
ever, it is essential to know what your customers and potential clients are
thinking to get them involved in the process: ask them what they desire, even
tailor your products and services to their needs creating faith in your company
with a personal touch. No longer will interruption marketing work: television,
radio, junk mail, spam, and pop ups.
You, as a company in the New
Economy, will need to get out and shake hands with the public, ask Mr. and Mrs.
Consumer what specifically it is that they desire. It's not about old ways or
systems or believing, "Well, that's the way we've always run things around
here." Get on blogs and post. Open a Twitter account. Go Web 2.0 and get social. Find
out what people are posting about your products and services. Lend a hand to
help customers understand and build relationships, avoiding any risky excessive behavior
that reeks of the unethical and indulgent. But most importantly, you've got to
ask your consumers, "What exactly do you need from us?"
Now is a great opportunity to prove
to the consumer that business is not bad that it's necessary, essential, and
that it can provide great value. But it is necessary to create relationships
based on trust, honesty, and a desire to serve rather than merely make profit
in excess for self-serving needs. Interesting to note that one of the banks
that survived and thrived amongst all the abuse and indulgence is Wells Fargo,
an institution that didn't get into speculation for mere profit, no documentation ("liar") loans, or ARMs with
their Pick-A-Payment programs. Wells Fargo has stayed traditional, ethical, and
is still working for the small guy (private accounts and small business) and thriving.
Now is the time to create a brand
that stands out, stands above those who've cheated, lied, and stolen. Now is
the time to have your brand stand above the rest that which when seen by the
average consumer stands for ethical and moral treatment and service
extraordinaire, trust and value that is there for the long haul.
Great article. Well done.I can see the decline of big business is only going to get worse. It's rather depressing to read your table.Connor,
So true. Thanks for stopping by to read and comment.
Hi Jeff.Thank you for a very informative article. I enjoyed reading it."...A brand that stands out, a brand that stands above the rest...stands for ethical and moral treatment and service extraordinaire, trust and VALUE that is there for the long haul." I will always remember this statement.NenitaYes, business must clean up its act. There is no choice. Thanks for reading.
It's a house cleaning for quite a few industries, isn't it? But you are right about some areas doing well. Healthcare is screaming for workers, but it takes at least two years to get qualified!Another great article, Jeff. I really appreciate your work, sir.Ken,
Thanks. I've got a followup that will help people to see that the economy is not full of rip-off artists and that they are the exception. It just happens to be that they end up in sectors where speculation and the opportunity for big, fast money is there. Unfortunately, the money may be big and fast but it frequently doesn't last long. Thanks for reading.
I believe (and hope) you're bang-on, Jeff. The alternative may be so bleak I don't want to think about it.Prior to the stimulus plan, experts like Peter Schiff were saying that things would be bad without the stimulus but worse with it . . . I hope they're wrong.I'm interested to see that you've written a book about education . . . I just finished "Weapons of Mass Instruction" by John Taylor Gatto that sounds up your alley.I've also written a novel (coming-of-age commercial fiction) entitled "The Point" via Lulu. Keep up the good work!John,
Thanks so much for stopping by. Yes, my book (tentative title) Education is a Wast of Time: Critical Knowledge Missing in the New World Job Market is my "business card" for the proprietary system I've developed for my startup, which will go live in about a month or so. As a former college instructor, I've seen the lack of preparation students not only have in the standard basics (reading, writing, arithmetic) but the intangibles needed to thrive in today's world.
I've also written another book that supports this one called Give and Grow Yourself Rich: Life’s riches are abundant in the acts we do for others. Begin here and receive your just rewards; as well as two other books: The People's U.S. Constitution: Academics and Lawyers Can Read Another Book and Motivational Quotes: Recalling Your Past. All written in the last couple years.
Great to hear from a fellow author. Good luck with your writing. If there's anything I can help you with, please let me know. Have a great week and thanks for taking the time out to read and comment.
Jeff,This is great stuff. Yeah, such indulgence can only be followed by a more conservative approach. I just wonder how many will stay the course as time passes and memory fades. Great article!Rob,
How true. Things seem to go in cycles with nobody learning the necessary lesson. Thanks for stopping by to read and comment.
Great article, Jeff. I must have a guardian angel--I retired and pulled out all my 401K just prior to the beginning of the 'end'. I do still have some stock in my old company that I am watching closely as it rollercoasters up and down. I'm trying to save that until things rise to an acceptable high and level out. Thanks for sharing the great info.SandraSandra,
Good for you. I know of people who have lost not only thousands but millions. Quite a shame indeed. Thanks for reading and commenting.
Great information much needed in todays falling economy, I must admit right before the brunt of the collaspe I invested the majority of my 401 K into foriegn companies. I am so afraid to check my standings!Jami,
I know what you mean. But it certainly is a lesson to all regarding proper principles and honest business practices. Thanks for reading.
Great yet depressing stuff Jeff. I had an account with Washington Mutual but they crashed hard enough to fall right into JP Morgan Chase hands.God bless,MichelleMichelle,
That seems to be common now, one company going under or being taken by a stronger one, a company like Wells Fargo or Johnson and Johnson who didn't go in for the quick and easy dollar but works for the long haul. Thanks for reading.
Business without ethics is bound to crash, even if it takes decades to reach the tumbling point. But how can there be business ethics when so many instructors of business schools prefer relativism and situational ethics rather than absolute standards of morality? Thanks, Jeff, for sharing your knowledge in this article. Very educational. ~mogama~Mogama,
The most successful business owners I know don't pay much attention to academics. There may be an answer in there as to their success. I noticed an article of yours on this very topic, by the way. A good subject that even the lay-person needs to be aware of. Thanks for stopping by to read and comment.
Very informative and well-done. The company I work for has been around over 100 years and last year they started to do things that were more customer-driven (as opposed to the old 'we've been around forever, that's the way it's going to be). In spite of a few missteps, the company is still very strong and is getting stronger every day. We're even hiring, which our competitors cannot say.I really cannot speak for anyone but myself, or any company other than the one I work for (although they probably wouldn't let a comedian like me speak for them), yet the facts you presented, along with the news we hear daily, speak loudly: American business must adapt or fail. The 'old days' are gone forever.Thanks for this article. I liked it.Mike,
Thanks so much for your kind and wise words. Yes, anyone who goes into business just to make a buck or exploit is a gonner. I was just reading an article on Madoff and it amazes me that with all his success prior to the ponzi scheme that he'd desire to do anything so stupid. But gluttony and lust are two of those deadly sins. Now he's got 150 years in prison. Where's the payoff? Thanks for commenting.
