Denial of the burst

When a bubble bursts, there are some who roll with that burst and start figuring out what next to do. Many other people stay where they are and "hunker down" in the same patterns of behavior. So, when the steel companies went bust, we saw a lot of people staying in the steel foundry cities and going broke.

We are in the middle of a double burst - first real estate, then living style. People used the real estate bubble to finance a lot of spending. A house is not a home unless it has "stuff" in it. Those extra rooms in that big house needed filling. The real estate bubble created a secondary bubble of life style and purchasing. That bubble is still continuing.

We are continuing to spend, but we are now doing it on credit cards. That means that the quality of debt on those cards is deteriorating and rapidly. The major credit card issuing banks have been taking on more and more of the risk that people were once putting on refinanced mortgages. We saw what happened to the banks that did the mortgages. We may see similar problems with card issuers.

Denial means that we keep on doing the same thing even when it isn't working any more. Denial in the mortgage bust meant that homeowners stayed in their homes even when they couldn't afford them any more. Denial meant that people were evicted and lost not just the homes, but often the food in the refrigerator, medicines, furniture, and family pets. Denial with credit card borrowing means that people will continue to borrow until the banks cut them off.

This means that banks that do not have a good risk management system will suffer large losses in their card issuing departments. It also means that we are facing difficult times as a country - both financially and politically. Denial means that people will look to the politicians to rescue them from what they have done but we have borrowed internationally and the politicians can't fix that. We are going to see more labor and social problems. Because of the international scope of the borrowing, we will see the pattern of "panics" come back instead of gentle "recessions" such as we had last century.

Denial is not just a river in Egypt. It is flowing through this country and will cause problems.

What it means is that there will be opportunities for people to scoop up assets when the denial is finally broken. There will be banks that fail. The credit issuing landscape will change. There will be a lot more foreclosure of homes. Just like other major economic changes, there will be political careers made and broken by this continued burst.

Have you changed your management style?

In hard times, it is very common to revert to "old line management" styles. We freeze travel, we cut back expenditures, we make a big deal about not spending on equipment, etc. Most of these are actually counter productive actions.

While it is perfectly normal to try to reduce expenses, the real benefit is when we involve the rest of the people in the company in taking ownership of the problems. There are always two problems in an economic slowdown: reduced income and too much spending. When we act as though the only problem is people wasting money, we cause our team to lose emotional ownership in all the problems.

People react to stress by reverting to old patterns. These old patterns are generally not beneficial to the company. Some of these patterns are: People act as though they do not want to help others. They focus on only their department and not tolerate issues in other departments.

We can see how the airlines have reacted by adding a multitude of fees and how it hasn't helped them much. Adding fees and reducing service has not increased their revenue by much and the unions are getting more and more ready to strike. The management is not keeping their team together well.

When employees take ownership of a problem, often a solution better than anything we can devise is found. Yes, it takes more guts to put the problems into their hands, but the results are often far better. For example, companies that have put the problem into the employee's hands have sometimes found whole new markets to tap, innovative ways to cut expenses, and different ways to split the work up so that overall costs are lower while averting layoffs.

So, can you continue to squelch the urge to take control and continue to build a team in the difficult times? If you want help with that, call 1800-618-4199.

Risky World

Bluetooth is the name of Big Brother

It started over in the English town of Bath. They structured the surveillance system to pick up the Bluetooth signals from people's cell phones and computers. The system was first designed to help track movements anonymously so that the city designers could better design the transportation system. However, the Bluetooth is picking up all sorts of private data such as names, addresses, etc. They are now able to track someone as they move around the city. Not only that, but the software was sold elsewhere in the world and people are being tracked as they move around the world. Privacy advocates are dismayed.