What is "The Economy"?

More than a decade ago I sat in a data center staring at a screen containing backup logs for a major agency of a state government. The logs made it clear that backups had been failing for months. My job was to find out what happened. I'm just built to get to the bottom of things, and part of my skill is to take apart the complex, interconnected pieces and find the simple parts. It makes it easier to figure out what happened.

Recently, I've done this with "The Economy."

People, especially experts and those who want to sound knowledgeable, talk about "The Economy" like it's an entity unto itself. Like it has a mind of its own, and it will head in various directions based on select, complex ideas like GDP, trade, and unemployment rates.

But, it's not. "The Economy" is nothing but a set of metrics (values of measurements) that communicate various historical truths (since most measures are 3-12 months ago). Economists, politicians, and pundits all use the numbers to beat up their opponents and to bolster their own theories, with all sides claiming proof for their viewpoints. And it's all mostly a great big show.

"The Economy" is nothing more or less than the collected decisions of human beings, including those responsible for making decision for corporations and governments. People decide to buy, save, or invest. As a result, funds become available as revenue, for loans, or in exchange for equity. The cumulative impact of these decisions results in the measures that become the economic metrics.

Underneath it all, however, are these decisions. They are made in an effort to keep a job, to profit, to look good, or to benefit one's own financial position. Sometimes, the decisions are speculative in the hopes of creating a large, fast gain. Other times, they are extremely conservative in an effort to avoid any risk or any possible loss.

But all of these are the decisions made by individuals and (sometimes) multiple individuals as part of a collective.

That's all "The Economy" is, though. It's the consequences of financial decisions of collections of people: cities, counties, states, countries, and the world.

When people stop spending and/or investing, we have a recession or depression. When business managers stop hiring, joblessness goes up. And so on.

We are a society that attempts to avoid the consequences of our actions. We want to believe that our intentions drive the consequences. They don't. The only thing that drives consequences is the natural laws that apply and the decisions that others make.

You can't escape consequences forever.

Apple Just Changed Publishing

It is very rare indeed when I disagree with Seth Godin. He is a brilliant man, a best-selling author, and an insightful coach for the emerging economy, but he's missed it on the latest announcement from Apple. I don't blame him. It's easy to do with all the changes that are bouncing around like a Heisenberg Uncertainty experiment. Today, in a useful post on his Domino Project blog, he says that Apple did not just make publishing easier with their announcement of the iBooks Author application. He rightfully notes that the iBooks Author application is about authoring books, not publishing them, and there's a difference between printing and publishing. All true.

However, the iBookstore itself is a new way to publish. In much the same way that iTunes changed publishing first for music and then for movies and TV. And the iOS App Store and then the Mac App Store changed the economics and dynamics of software publishing, so will the iBookstore change the dynamics of book publishing. The iBook Author app is the disintermediation of book creation and the iBookstore is the creation of a publishing platform designed for social discovery and long-tail economics.

Unfortunately, I think that Seth falls into a bit of myopia here due to his experience with and success in both using publishers and creating a brilliant new publisher in his Domino Project. He sounds like some of the doomsayers in the early days of iOS apps.

Publishing will never be the same. Neither will making and selling music or making and selling other creative works. Seth knows this. Perhaps the world changed publishing and Apple is simply building tools for the ride. Regardless, anyone can now create and publish a book. Selling it requires building a tribe, just like it always did, but now you get to do it on your own.

How to Succeed, Part 2

In the first installment in this series, I mentioned the first law of success in Zig Ziglar's terms: "You can get anything you want out of life if you just help enough other people get what they want." As you dissect that concept, you will begin to see how powerful it is. The value you generate to others will determine what you receive in life. There is a value that you generate for one person which is multiplied by the number of people you find who want it. As you grow the per-person value, your reward grows. As you expand the number of people, it also grows. While outlining this law in his famous record "The Strangest Secret," Earl Nightingale articulated it in this way:

Your success will always be measured by the quality and quantity of service you render. Most people will tell you that they want to make money, without understanding this law. The only people who make money work in a mint. The rest of us must earn money. This is what causes those who keep looking for something for nothing, or a free ride, to fail in life. Success is not the result of making money; earning money is the result of success — and success is in direct proportion to our service.

Most people have this law backwards. It's like the man who stands in front of the stove and says to it: "Give me heat and then I'll add the wood." How many men and women do you know, or do you suppose there are today, who take the same attitude toward life? There are millions.

We've got to put the fuel in before we can expect heat. Likewise, we've got to be of service first before we can expect money. Don't concern yourself with the money. Be of service ... build ... work ... dream ... create! Do this and you'll find there is no limit to the prosperity and abundance that will come to you.

Apply this rule today and you will begin to see a change for the better.

Rule 2 will become present in your life very quickly, then. In fact, it has been often on my mind this week and has come up in multiple conversations. Here's the story of one of them:

I met with a good friend for lunch this Wednesday. He's an Elder in our church, and I have served with him on the board of directors for a local non-profit. He is a wise and successful man. We met to talk business, challenges for some of the people we know, and the influence of spiritual truths on our lives. During our conversation, we shared our thoughts on helping two of the men we know. These men have been challenged in the job market that has emerged during this time of economic uncertainty, but they have given up. Their wives are working, but they are not. The stress on their marriages have them both on the rocks. Unless something changes, it's likely that we will see both of their marriages rendered asunder, kids damaged, and souls devastated.

All because they have been broken against the rocks of the second law.

Ironically, during the conversations with my wise friend, we talked about his response to the economic conditions. His story was much like my other wise friends, and went something like this: "When the economy changed, on of my primary sources of income stopped. Suddenly. Overnight, services that had been providing 30-50% of our income dried up. I had to find ways to replace it. I went back to school. Renewed my license to broker loans, and added that to my services."

Do you see the difference?

During the second world war, Viktor Frankl was taken prisoner first to the Theresienstadt concentration camp and later to Auschwitz. During his time in the camps, he came to a profound understanding of the strength of human consciousness in the face of difficulty and suffering. It was he who said, "Each man is questioned by life; and he can only answer to life by answering for his own life; to life he can only respond by being responsible."

And it was he who first pointed out, "Between stimulus and response there is a space. In that space is our power to choose our response. In our response lies our growth and our freedom."

"...our power to choose our response." This concept is pregnant with potency. So many avoid this truth and hide from their responsibility by pretending that their lives are not their own; that somehow the faceless "others" dictate the direction of their lives. They seem themselves as powerless to make their own choices. Yet these thoughts are all lies... and they lead only to pain, suffering, and failure.

It is you who chooses. They are your choices. No one controls you, although many will work to influence you using a broad range of tools from their words to their threats and from there to the exercise of authority. Ultimately, though, as Frankl so thoroughly proves in his seminal work, "Man's Search for Meaning," it is up to you what you do and no one else is responsible, accountable, or capable of living your life or making your choices.

Recently, my friend and mentor Matt Furey has expressed this truth in this way: "You are not to blame for everything in your life—but you are responsible for how you think and feel about everything in your life."

This is the second law of success.

How to Succeed, Part 1

I read it again today. While sitting in my kitchen reading my daily dose of news, I once again read about how evil the wealthy are, how they don't deserve what they have, and how they "aren't paying their fair share." All untrue.

We certainly do need leaders, but since our current crop of political parasites do not have the fortitude to lead, it will fall to us to lead ourselves.

First, it's absolutely critical to understand the truth about money and wealth. It's the starting point. Without that understanding and mindset, nothing else will matter.

To explain, let me take you back a few weeks to a hotel conference room in Clearwater Beach, Florida. It was a Sunday afternoon. We were nearing the conclusion of a solid three days of coaching and instruction when my friend Everte Farnell stepped to the front of the room. He held us spellbound with his wealth secrets from the ancient wisdom he has been studying (more on that in the future on these pages), with one package of insights so clean and important that I will share some of it with you now.

First, it's useful to know that during these sessions I had experienced some intense one-on-one coaching in front of the room. So, during his talk, Everte looked directly at me and challenged my thinking. Then, he said something very important to the entire room: "We live in a cultural lie. Our culture is egalitarian. The lie is that everyone is the same, so if someone is more successful than someone else, it must be because they have lied, cheated, and stolen. It's not true! Everyone is not the same. Some are smarter, more skilled, and more valuable as a result. Believing otherwise will keep you in bondage for the rest of your life."

Can you see how easy it is to buy into the lie that everyone is the same? Of course, we are all human beings and we have inherent value as people, but that does not mean that what we have to offer others is the same as anyone else.

For example, is Steve Jobs more valuable to Apple than Gil Amelio? Of course! Amelio nearly killed Apple, while Jobs has brought it back and into a dominant role in the marketplace. Amelio is a very talented individual, but wasn't the answer for Apple. Jobs is much more valuable in that role.

The same is true of you. You offer unique and valuable skills and abilities. What are they? How can you tell?

This is the first secret. It's difficult for some people to accept. Regardless, it's true. Here it is:

Your financial value is exactly what another is willing to pay you for what you offer times the number of people you can find to pay.

There is no other measure of financial value.

The first secret of success is this (as put by Zig Ziglar so many times): "You can get anything you want out of life if you just help enough other people get what they want."

What can you help other people get that they want? The more valuable it is to them and the more people you find who want it, the more you will earn.

You really can get anything you want out of life if you just help enough other people get what they want.

Will you?

The Void of Leadership

I've been saying and writing about it for a while, and the rising din of those frantic to avoid the loss of power that seems to be building is making it clear there is an anger simmering. Why?

There are no leaders. There are controllers and authoritarians, kings and rulers, but no leaders.

In her exellent article "The Liberals are Losing It," Liz Peek describes the current state of panic within political circles because there is no leader. I disagree with her in one area: I don't think it's a "liberal" issue. It's an issue for all of the "career politicians." (A phrase which should be an oxymoron!) Those who seek to earn their livelihood from making laws, discussing policy, and "governing" are all waking up to the fact that they are not only distrusted, but disliked, denounced, and denigrated. We don't need politicians to tell us what to think and do. We need leaders to rally us around a common vision for the benefit of all.

It remains amazing to me that so many are being so easily misled. Many apparently believe that wealth is not earned. Apparently, they think, the way that one becomes wealthy is to steal from others.

At the same time, those people want to themselves gain wealth. They play the lottery, try get-rich-quick schemes, and maybe even try to "bend the rules" a bit to get more.

I guess because they don't succeed they think that those who do are cheating, lying, and stealing. Hollywood doesn't help, of course, and ironically, given the earnings of so many who work there!

Politicians today are fanning these flames. Jealousy and enmity serve the unproductive governing class. They keep those who could succeed from realizing their personal power and the path to success. By doing so, they keep the politicians and policy-makers in the money while appearing to "care" for those "who are less fortunate."

If they really cared, they show them the path out.

Starting with my next post on this topic, I'm going to do just that.

How You Can Change the World

It's been beautiful here in Boulder for the past week. Cool in the evenings, sunny during the day, with the occasional thunderstorm to brighten up the afternoon. During this week, I've had a great exchange with Stephanie George, my brilliant friend who helps businesses to see their current business situation through objective eyes, offering business development and strategic consulting. One of her emails to me yesterday was so perceptive that I'll share it with you in its entirety in this post. Her insights are right on. The rest of this post (with minor edits for the change of medium) is from her:

I think that we also need leadership. The two quotes were right on and - they came from leaders. Leaders do not have to be the President alone, Leaders emerge at all levels. I think it would be refreshing for a bold, non-partisan heavy hitter to enroll some outstanding legislative leaders, the President, and the media to stop cramming fear and uncertainty down the public's throat.

Bad news sells better than good news, so the media may be challenging to enroll on a wholesale basis. Also, I don't think a pollyanna outlook would sell well.

It's not just a policy or a budget patch that we need to crank the engine and that's all that I've heard proposed from our legislative and executive branches so far (red or blue). There is no Unity. Remember "Together we stand, divided we fall"? That's what's missing. There is too much interest and money to be made in dividing up the sentiment and no one working to unify it.

A mortgage broker actually told me once that he didn't care if the market went up or down, as long as there was some sort of change, he would make money. His interest was not in seeing an overall rising of the tide or in others successes, but in keeping things off balance, because it kept creating opportunities for him to make money.

I think that Bush actually tried to connect everyone on the war - it worked immediately following 9/11 and in WWII, but when there is dishonesty as the foundation (WMDs anyone? then one after another different reason for making war was brought forth, none of them more substantial than 4th grade retribution), the rest of the construct falls apart. And when our leadership cannot be trusted, people lose confidence. As long as our bodies of leadership snipe at one another endlessly, it firstly, seems utterly arrogant and self-righteous, and secondly, does not engender faith in their ability as a corporate body to get on the same page.

I know that I have simplified foreign, economic and political policy in there. It's not a simple problem. However, on confidence:

I don't stand on there being THE ONE omniscient leader; all of our elected officials have the freedom be the leader that we need. However, they would need to give up personal hubris.

So, that's top-down confidence.

How about bottom-up confidence? Enroll and empower everyone to develop their own confidence. Probably creates a bigger tide than waiting for the top-down to get it done.

Educating everyone we meet that who they are is bigger than their circumstances; they are not defined as a possibility in the world by their checkbook balance or net worth or job or their diploma. Joy, confidence and happiness are not a function of any material detritus they manage to assemble in their lifetimes. Acknowledging one's own true personal power is at the source of confidence. It is not someone or some thing outside of us, it is in each of us. (Cue Marianne Williamson quote: “Our deepest fear is not that we are inadequate. Our deepest fear is that we are powerful beyond measure. It is our light, not our darkness that most frightens us. We ask ourselves, Who am I to be brilliant, gorgeous, talented, fabulous? Actually, who are you not to be? You are a child of God. Your playing small does not serve the world. There is nothing enlightened about shrinking so that other people won't feel insecure around you. We are all meant to shine, as children do. We were born to make manifest the glory of God that is within us. It's not just in some of us; it's in everyone. And as we let our own light shine, we unconsciously give other people permission to do the same. As we are liberated from our own fear, our presence automatically liberates others.”)

Maybe we should bring back that old Skin Bracer commercial with Jack Palance telling us all that Confidence is sexy. That's it! We need a new marketing campaign for Confidence! Confidence is Sexy. (Editor: As I mentioned to Stephanie in a follow-up email, Palance had it right in City Slickers, too.)

I went through the Harn Museum of Art a week ago and they have on display a series of public propaganda posters from around 1924 - 1936. How about some National Confidence propaganda - lots of it - that is not one diva or guru's pocket lining? That's not tied to some partisan agenda? That doesn't come out of Obama's mouth or John Boehner's mouth?

What Should the Government Do?

This morning, one of my good friends--a brilliant and insightful business analyst you should know--asked me what I thought about the latest McKinsey Quarterly newsletter article entitled, "Where are the jobs." Given the questions that I have had on this, I'll share my thoughts that came from my response to her: he key job growth will come from small businesses, including innovations in retail (did you see this article about 4Food?). And the only way to get businesses in those sectors to grow is to free up money that is not being used to pay them right now: consumer's money and larger businesses' money that is used to buy products and services from these smaller businesses.

What is going to free those funds? Confidence.

Yeah, I know it's not the whiz-bang idea that everyone thinks we need, but it really is what we need. Confidence. It was the key difference between two speeches from a generation ago:

"The symptoms of this crisis of the American spirit are all around us. For the first time in the history of our country a majority of our people believe that the next five years will be worse than the past five years. Two-thirds of our people do not even vote. The productivity of American workers is actually dropping, and the willingness of Americans to save for the future has fallen below that of all other people in the Western world.

"As you know, there is a growing disrespect for government and for churches and for schools, the news media, and other institutions. This is not a message of happiness or reassurance, but it is the truth and it is a warning." (that was Jimmy Carter's infamous speech, that entirety of which is here... how familiar does that sound and how true (again) today?)

Compare it to this:

"If we look to the answer as to why, for so many years, we achieved so much, prospered as no other people on Earth, it was because here, in this land, we unleashed the energy and individual genius of man to a greater extent than has ever been done before. Freedom and the dignity of the individual have been more available and assured here than in any other place on Earth. The price for this freedom at times has been high, but we have never been unwilling to pay that price.

"It is no coincidence that our present troubles parallel and are proportionate to the intervention and intrusion in our lives that result from unnecessary and excessive growth of government. It is time for us to realize that we are too great a nation to limit ourselves to small dreams. We are not, as some would have us believe, doomed to an inevitable decline. I do not believe in a fate that will fall on us no matter what we do. I do believe in a fate that will fall on us if we do nothing. So, with all the creative energy at our command, let us begin an era of national renewal. Let us renew our determination, our courage, and our strength. And let us renew our faith and our hope."

That, of course, was Ronald Reagan's first inaugural address, and it's no less true today.

After that speech, the country went on a tear that lasted a couple of decades.

The facts are that creativity fuels innovation and innovation fuels the economy. Without confidence, there is no creativity.

What can the government do? Stop the spending, drop the taxes, create a predictable environment for innovation to be free to develop. Otherwise, the innovation gets spent trying to get around governmental interference.

What do you think?

More on the Remedy for the "Hireless" Recovery

There are a number of very specific reasons that this worldwide economic situation persists, primarily, as I wrote earlier, due to the very poor decisions and lack of clarity from politicians. While we do live in a worldwide economy, the United States remains that primary engine of that economy. For that reason, what happens in the US leads the rest of the world in a particular direction. Right now, that direction is aimless wandering. For more evidence of the repercussions of the unpredictable environment that the US government has created with its fast-changing taxes, fees, and laws, realize that the 500 largest non-financial corporations are holding more than 10% of their assets in cash according to a recent Wall Street Journal article. That's about a trillion US dollars sitting on the sidelines. It's not hiring new staff, developing new products, or buying new capital. It's sitting there doing nothing.

Why? Because the management of those companies doesn't know what they are going to have to do next as the US government changes the rules yet again. So, they hold on to the funds just in case they might need them to handle yet another "great idea" from government bureaucrats who have never had to make payroll or delivery a product or produce a service that customers value. They are utter unequipped to understand -- much less implement -- effective solutions to economic issues involving the complex interrelationship of business.

The first thing to do is to promise and then deliver predictability to the market, and not just for interest rates. Interest is not the only expense that businesses have to plan to address, so predictability must extend to the other areas such as regulation, taxes, fees, and other mandates. When that happens, those funds will find their way into investment, turning into jobs, investment, and an economy on the rebound.

Until then...? A continuing malaise.

A Further Analysis of Network Neutrality

Earlier this week, you may have read my post on Why "Net Neutrality" is Wrong. In it, I illustrated the reasons for network management control of the network, and also mentioned how most of the politicians involved just don't get it (and believe me, I got email about the video linked to my "idiot politicians" statement!). Today, Larry Downes of The Technology Liberation Front breaks down the Google/Verizon model legislation and outlines the irony of who is complaining about it in his excellent article Deconstructing the Google-Verizon Framework. When you read it, you'll begin to see the disingenuous nature of so many knee-jerk reactions to political gamesmanship. It's a good read.

The bottom line remains: if we are to have all of the applications that we want to have on the Internet, we need to protect it from being controlled by political whims and wanna-be political engineers. The challenges are far greater than can be solved by political debate, and most of what we're seeing these days makes it clear that actually solving problems is beyond the ken of most in political life. Note that I don't call them "leaders." That's on purpose. I have too much respect for true leadership.

Of Course It's a "Jobless Recovery"

As I sat in my family room here in Boulder, Colorado a few days ago thinking about the utter ignorance of the people who are making laws in this country, I began writing this post. Then, this morning, I read this excellent piece in the Wall Street Journal: "Why I'm Not Hiring" by Michael P. Fleisher outlines the reality of the situation that the ignorant, poll-driven politicians have created. Subtitled, "When you add it all up, it costs $74,000 to put $44,000 in Sally's pocket and to give her $12,000 in benefits." the piece demonstrates why the "recovery" is "jobless:" The government is doing almost everything in its power to make it painful to hire, and is simultaneously making it clear that it will very likely get more difficult to hold on to existing employees by increasing fees, taxes, and other mandatory payments for having an employee.

In short, the politicians have killed any hope of new jobs.

And why wouldn't they? They don't understand business. They don't see how many flows in business, or understand forecasting, revenue, cash flow, or managing to a budget. After all, when they want more money, they simply pass a law to get it.

Of course, those laws never actually work they way that they had planned, since money naturally moves away from areas that are taxed. That's why no one is hiring.

So, in short, the very structures that the government is putting in place has killed the employment marketplace. It will not improve until there is some assurance that the idiots in Washington, D.C. won't make yet more changes on a whim and a prayer. And that's not going to happen until there is a change of thinking in those circles.

You cannot vilify business and those wealthy enough to run businesses without also decimating the job market. Yet, that's exactly what they are doing in D.C.

Update: So what can be done?

It's actually quite simple: lower the burden on those who do the employing, and make the costs of hiring and maintaining employees predictable.

How is that done?

That's also simple: reduce taxes and fees on employers and employees and create laws and policies that make those reductions predictable, giving 12 months' notice for any increases. When increases can happen at any time, business owners and leaders must maintain additional reserves to cover unexpected costs dictated by the whims of government.

For some real research into what happens when these kinds of approaches are followed, look at The Historical Lessons of Lower Tax Rates, the Joint Economic Committee report on the Reagan tax cuts, and Wikipedia's explanation of the Laffer Curve for some insights into how complex the interconnections are. Regardless of this theoretic conversation, predictability is the key to business management, and the lack of predictability is a primary issue impacting the "Jobless Recovery" that we're now seeing.

Second update: I am clearly not alone in my thinking on this. For another, there is Michael Schrage's perspective on his Harvard Business Review blog article "The Hireless Recovery" (my thanks to my good friend Stephanie George for pointing me to this article!).