It's the Economy, Stupid

Wow, so two weeks ago I wanted to write about technology and business. And I still do (and will). However, there comes a time when an adjustment needs to be made, and for me that time is now.

The economy is in the tank with no end in site. Asian markets dropped 9% overnight and the European markets took a battering until the coordinated move of central banks moved to adjust interest rates around 4am this morning.

New York City at Night

Banks are closing left and right and the government is bailing not only the banks out, but also commercial entities. In the last few days, no fewer than three people I know have lost their jobs.

People are scared, and rightly so. This is the darkest hour in recent history, rivaled only by 9/11.

Last night on FriendFeed, my friend and colleague Robert Scoble was fretting about the downward spiral. Scoble, to his credit, was trying to work the fear out of his system. Some people felt he should step up and be a leader and inspire confidence, while others felt his pain and lamented with him.

For my purposes, I’m scared as hell, but I’ve chosen to be confident. This is not a false confidence. This is a confidence based in reality and historical context.

Look, folks. Things are going to get worse before they get better. I like Jason Calacanis’ point in in one of his most recent newsletters entitles (The) Startup Depression:

Depending on your DNA, getting your ass kicked is either complete
torture or deviantly rewarding. Truth be told, I like getting my ass
kicked because it makes me angry, motivated and focused. If I look
back on the couple of moments of success I’ve been lucky enough to
have in my life, they all seem to come after a good ass-kicking.

The darkest hour is”“in fact”“right before the dawn.

I’ll also never claim to be an economist, but I read and listen to smart economists and money-people. I look at evidence they provide and I run it through my bullshit filter and what comes out the other side gets stashed in my collective. I reconcile conflicting data and try to understand those conflicts.

Here’s what I (think) I know.

Human nature is all about patterns. When a pattern changes abruptly, it takes us out of comfort zones and can sometimes induce panic. It happens when you lose a job. It happens when you meet your girlfriends parents for the first time. It happens when you transfer into a new school. And it happened when the market started selling off at 500 points a pop.

In the case of the market, 500 points looks big – and it is – and the ramifications for someone like me or you who are not traders and don’t understand the nuances of the market are psychologically intimidating.

Fear breeds a lack of confidence. A lack of confidence breeds fear.

Because humans are a people of patterns, after a few weeks of major drops on the market, a pattern and a cognitive comfort level sets in. Investors begin to see opportunities instead of challenges. Bargain buyers go thrift shopping and a rebound begins.

In my investment armchair, I see the end in sight. We are not there. We are going to see lots more before it turns up. But, my instinct tells me we are nearing a bottom. That doesn’t mean things turn around overnight.

In fact, I expect a lot more people to lose their jobs. The web sector has been largely immune, but will probably get walloped hard too. I spoke yesterday of staying in a self-employment situation if you can and staying in a stable 9-5 if that’s where you are now.

Which brings me full circle. We need leaders. We need people who are going to step up and instill confidence. Fred Wilson did this yesterday and I want to see more from a fiscally minded individual like him (he’s a VC). Scoble is still trying to process it all, and that’s expected, but I hope he will come to grips and start inspiring people at some point.

All of the proverbial A-listers need to step up their games right now and be leaders. In the days to come, I’m likely to write a series of posts on leadership. In the months to come, I’ll also take a much bigger look at the economy in the web space and outside. In World War II, homemaking women went to work in the factories to support the men in battle. It’s our responsibility to take the positions we have and do good in the economy and for our space.

So, though I’ll continue to write about the web, business, technology etc – I’m also going to be talking economics. I don’t know everything, but what I learn I hope to pass back. We will get through this because we have to.

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Aaron Brazell

Aaron Brazell is a Baltimore, MD-based WordPress developer, a co-founder at WP Engine, WordPress core contributor and author. He wrote the book WordPress Bible and has been publishing on the web since 2000. You can follow him on Twitter, on his personal blog and view his photography at The Aperture Filter.

5 thoughts on “It's the Economy, Stupid”

  1. I swear I'm the only one NOT freaking out. Why? Well first and foremost as much as I love money, I know I can live without it. It's not fun, but it's been done and we can all do it again. Second, people survive. They are survivors by nature. We survived the Great Depression and once people can't get their $4 lattes, they will freak out enough to actually make changes. I also think you do need to rely (with a health dose of cynicism) on economists and people who actually do know their shit. But that means trusting them at some point, which I am not sure any of you are willing to do.

  2. Thanks for writing about the leadership topic this is something that is on my mind constantly as I am in IT (Business Systems Developer) and constantly see a lack of leadership around me. However, I have to say that I don't think people are freaking out about $4 lattes so I would appreciate it if the cynicism doesn't go that route so that your message doesn't gets lost. There are pensions and retirements at stake. The people who are going to be hit hard are elderly and others on fixed incomes, not to mention those who will lose their jobs of course. You're right though, during hard times people just need to suck it up and try to make moves towards progress; which is probably where we come full circle with your leadership topic. I think people need real models too and lending a helping hand to someone in need goes a long way in terms of leadership in my opinion, not to mention your psyche. Blogging and web reading is good, but get out there and get your hands dirty everyone!

  3. I don't make my comments about $4 lattes lightly. It speaks directly toconsumer confidence for the same reason that Apple stock took a 20% hit lastweek on expectations that consumers would buy cheaper computers as opposedto sexier Macs. Keep the big underlying problems in focus with thosecomments. People will start buying 99 cent 7-11 coffee over $4 lattes whenthings get really bad. It really is a bellweather.

  4. The scary thing is that so many people that I know are already on shoe-string budgets. They don't buy anything that they can live without. A $4 latte? They'd have a heart attack! So this economy sinking into the big black hole is going to put them out of their homes. I don't think we have enough homeless shelters out there to accommodate all the homeless people that are going to be needing their services. A gloomy picture, yes, but I am concerned that it is accurate. I hope the economy rebounds quickly!

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