Comparing Recessions

I'm sure Time Magazine doesn't need a link from me to drive traffic to their website ... yet here's a link. Girard Sagmiller of CST Industries passed it on to me so a tip-of-the-hat to Girard.

Recession versus Recession versus Depression

This is a superb comparison of length and severity of recessions and the Great Depression. As you can tell from the chart, we are just a little worse off the the 73-74 recession. Being old enough to remember that one, I'd say that feels just about right. What I have trouble seeing on this chart is the trend for the 81-82 recession. As I remember that one, it was worse than what we're in now (I still haven't seen anyone popularize a misery index like in that era) - but memory is a funny thing and facts are hard to fine.

Fighting the Recession with IT

Here's the money quote, "It is imperative that IT investment decisions receive full board attention in the current economic climate,” said Streibich. “Executive boards that are not aware of the strategic value that IT can bring to the enterprise are in danger of losing out to faster, more agile competition.”

I've had a frustrating day at work so this seems more like wishful thinking than a truth. Do I believe it, absolutely. Unfortunately, I do not believe that company boards believe it - at least not the average board. This recession is a unique opportunity to invest in technologies that will enable the successful company to seriously damage its competition.

But then, such a company must have two important attributes. First, it must have a strong balance sheet to be able to make R&D investments in bad times. Second, its management must be forward thinking.

Recessions make most management teams defensive and want to tuck into survival mode to wait out the storm. Who are the companies investing for the upturn, right now? I wish I knew.

How am I doing?

Here is my first report card on my own performance as a soothsayer. First, please read my clip from a few weeks ago.

First - the United States will lead the developed economies out of recession in Q3 of 2009. The equities markets will start to predict this in mid-Q1 2009. (Remember that stock markets are leading indicators and labor markets are lagging indicators. The unemployment rates will lag the return to growth by many months.)

The return to growth will be weak at first (maybe 1 percent in all of 2009) but will pick up speed in 2010 as the Federal Reserves money printing takes hold. (I just looked at the Monetary Base numbers for 2009 and the almost-no-growth line up until August 2008 has been replaced with positively explosive growth since then. The Federal Reserve was truly asleep at the wheel regarding the Monetary Base this year --- but at least they seem to have awakened now. http://www.federalreserve.gov/releases/h3/Current/)


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I'll hold to these predictions with this one change: My prediction for a market move starting in mid-Q1 2009 was wrong. It is now mid-Q1 2009 and the Dow is, in fact, still declining. I'll push this out to the end of Q1.

Now - as a libertarian - here is my lament. The US government appears to be making matters worse but it's not my purpose here to deconstruct things like housing plans, stimulus plans, etc. The normal mechanisms like the Federal Reserve appear to be working properly but the stimulus plan and the still-existing zombie monstrosities like Fanny Mae and Freddie Mac will, in fact, delay a recovery. Instead of a true rebound, I think we're in for a multi-year walk along the bottom with a slow ascent that won't feel like a recovery to the average Joe on the street

Mavericks in the Organization

How does investment in IT affect the organization's structure? How about interesting tidbits like this, "Firms with more PCs per employee had a more decentralized allocation of decision rights for several key technology decisions."

Or how about this juicy number? "Information use was positively correlated with increased revenue and project completion."

And this is particularly telling, "Asynchronous information seeking (such as email and database access) promoted multitasking, while synchronous information seeking (such as phone and face-to-face contact) showed a negative correlation." Now that's a statement I could discuss for quite a while.

It's a nice piece of research that you should read for yourself.

Measuring the Business Value of IT - Including Intangible Benefits

Here is a very interesting work done by Forrester Research on the behalf of SAP. In particular, the author - Craig Symons - has a lot to say about measuring those pesky intangibles. Registration may be required.

Time for Orderly Dismemberment

This is off topic for this blog but please forgive me this transgression. Is it time for orderly dismemberment of the larger, now obviously failed, financial institutions in America? The most obvious way to do this is through a Chapter 11 bankruptcy. The large banks like Bank of America are quickly becoming a cancer in the economic world and the U.S. government appears to be doing more harm than good in this regard.

There are few people in the world more in favor of free markets than I am. But the actions of arrogant bankers like John Thain are reminiscent of Worldcom and Enron. I think Adam Smith would tell you that the only way guys like Thain can so egregiously mismanage a company is because normal market signals aren't working here. I'm not sure why that is - except that the government is now playing a major role in the management of the large banks.

But in any market where the signals are not clear there are huge opportunities to make money. This is where day traders and hedge funders make their livings. There is an old Steve Martin routine about how to avoid paying taxes on a million dollars. It starts with "first get a million dollars". Oh, that I had a million dollars to play with in this market ... but first I must get a million dollars.

Perhaps after I got my MBA in Finance, I should have gone to Wall Street. I did have a couple of calls from recruiters, after all. But, no, IT seemed more interesting and a lot less stressful. (Well, that and a young family to support who certainly didn't need the breadwinner changing careers and starting over.)

So, I don't have a million dollars to play with on Wall Street. Too bad because I think today I'm smarter than those guys. Not more clever, mind you, but smarter. They are clever, like cunning animals.

I once worked for a company that will remain unnamed. We had an executive who did terrible, long-lasting damage to the organization through extended mismanagement. He was finally relieved of his duties and the rest of us had to pick up the pieces and turn the operation around.

One day we were discussing this around the coffee machine. One colleague commented on how much money the guy was certainly making. Another quipped, "Gee, I would have done half the damage and only charged half as much. I would have been a bargain."

Read the link. I would have done one-tenth the damage these guys have done and only charged one-tenth as much.