Tag Archives: change

Are You Ready for a Strange Time?

A strange time. What, on earth, is a “strange time”, and why might you have to prepare, to be ready, for it?

The past few months have given us clues, if we only bother to look for them.

So let’s look, shall we, and think about what it might all mean.

This is, after all, about doing personal due diligence. Such looking is a diligent person’s stock in trade.

A society deflating around us

Deflation is far more than just falling prices, although that is how it is often portrayed. It’s also far more than something central bankers get all panicked over, doing “whatever it takes” to fight.

Deflation is the shrinking of the economy. In particular, money increases in value. Labour is less valuable. So, too, is debt – quite a bit less valuable, in fact.

A deflating economy takes real money – cash in hand – and raises its value. Technological improvements (whether those are physical or programmed technology, or better processes, or better ideas) increase productivity. This shows up as needing less people to do the same work. That, in turn, shows up to you as job risk.

Since the 1990s at the very least – it was then that the first web sites went online, that most people started to buy computers, and that electronic communications (starting with email and text messages) became a part of our lives – technology has been wiping out jobs left, right, and centre.

This hasn’t shown up in an obvious fashion. The jobs I held in the 1970s were still there in the 1990s. They don’t exist at all today in the 2010s. But new jobs have replaced them, right?

Well, not exactly. Toronto, where I live, is a prosperous city on the surface. But it has over ten percent unemployment. Half its citizens only hold part-time jobs – often, two or three of them, none with benefits, none paying well – or are “consultants” scratching out a living from one project to the next.

50% with no security, 10% with no anything – only 40% have some degree of security. That’s not prosperous.

But, like Japan two and a half decades into a deflation, appearances differ from reality. Japan has lost its lifetime employment guarantees during these years. Only the fact that the Japanese population is falling has stopped mass unemployment from becoming a reality (the way it is in Europe in most of the countries along the Mediterranean). But many Japanese now scratch out a living from project to project or hold part-time positions without benefits, rather than the lifetime positions they used to hold.

Canada and the United States faced their last long deflation after the American Civil War and after Canadian Confederation. The 1870s, 1880s, and 1890s were decades of deflation. Look at the progress: streetcar networks in cities, electricity, the phonograph, the projector, the automobile, asphalt and macadam (to pave roads and put the mud at bay), street lighting, a web of continental railways – it’s a long list. But for a quarter century jobs were hard to find, self-employment wasn’t rewarding in most cases, people on farms (and doctors) lived near starvation most of the time.

The next few years will see this deflation – that began two decades ago – erupt into full view. The central banks will, either by choice (as with the Swiss National Bank this month, or Iceland’s central bank), or by being forced into it by the market, to give up trying to forestall this deflation.

They spent $50 trillion – yes, $50,000,000,000,000 – over the last seven years to stop this deflation. That money must still be repaid (it’s on their books as loans). But, in a deflation, debt doesn’t get cheaper – it must be repaid with ever more expensive money, as money grows in value (a dollar buys more, in other words).

The nineteenth century didn’t have central banks and spent half its time in inflation, half in deflation. That was the pattern since the fourth century in Europe. The twentieth century was one long inflation.

Dare you bet that the twenty-first, starting in deflation, won’t be a long, long run of deflation (relative to periods of inflation)? I wouldn’t.

What this means for your career is twofold. First, everything you know about assets, how they change in value, their long term value, is suspect. All that knowledge comes from inflation. None of it comes from deflations.

Second, jobs held up by inflation – especially those that aren’t critical to the work of the firm – are about to be dispensed with. Firms need plant workers and sales staff. They don’t need analysts, strategists, human resource clerks, and the like.

Look at how much of the support of the business is already outsourced. Ask what happens next.

It’s not only important that you do – it may be the difference between you having a retirement and feeding your family, or not.

If that sounds extreme, well, I’m sorry. But deflations are payback time – payback of debt, and payback of structural debts in the economy.

You and me? We just have to stay out of the way of being ground down.

Risk is free, risk-free costs

Enough said.

Change, dreams and the fall of empires

The National Archives of the UK’s Maps in Time illustrates how humans changed the political and economic map of the world between 1900 and 2000. Maps in Time makes its case so effortlessly that it’s easy to overlook the complexity and enormity of the work behind the project. One hundred years worth of documents and countless bits of information had to be collected, recorded, stored, massaged, analyzed, collated and readied for presentation for the purpose of helping us understand how the world we live in came to be. The thinking behind the project is as impressive as the project itself.

In the end, it’s all about information. You can visualize how the state of the world’s empires has changed and declined since 1821 by clicking here. Or watch shrinking ice caps through NASA images from space for the 32 years since 1980. Then there’s the constant motion of weather in real time available at Environment Canada’s website. You can acquire a sense of where the world economy is going by checking the Dow-Jones and NASDAQ closing averages at the end of each trading day.

Information was plentiful, available and accessible and might have caused university graduates who are still waiting for one or more of the degrees they earned to bear fruit to think more critically about their choices and examine more options (Demand and supply. Entitlement and teaching our children how to fish.). But they made a conscious decision not to access it. Why? Did they stumble across their original premise that university education will automatically translate into a “well-paying job in my chosen field” on their own or did others influence them? If there were others, who were they? On what did they base their recommendations and/or pressure? What was their prognosis for the future? How much skin did they have in the game? Why have things gone so terribly wrong that 30-somethings are moving back to their parents’ homes?

Maybe it’s because some of us prefer to treat change as something to be resisted and ignored. Change is at the heart of every one of the examples above and, like risk, it can’t be ignored. A single bump in the road may be an aberration: recurring bumps in the road may signal a trend and a sign of things to come because ours is not a steady state world. In the span of two days we experienced one meteor impact and one near miss.

Poor decision-making in selecting postsecondary education has proven to be a better predictor of debt than of financial security. The students who placed their bets and lost used steady state arguments to justify decisions about investments of time and money that couldn’t be justified—and still can’t. For those who prefer their history in bite size chunks, consider Nortel, HP, Dell and RIM (now BlackBerry). All four used to be considered steady state. Nortel is no more. HP is working on its 6th CEO since 2005. Dell is taking itself private, and RIM… well, we all know about RIM.

When it comes to the future and the role of education in shaping it, we have much to learn from the Finns and the Swiss. The generation just entering the workforce with at least one and, increasingly, two or more university degrees and the debt to prove it, is living proof that what we don’t know can hurt us—all of us. Not knowing is no longer an excuse. What they didn’t know has hurt them and, possibly, their dreams of a good and secure life.

PDD recognizes that discomfort over change is as much about emotion as it is about intellect. The art of the Great Masters, the works of the great composers and the literature of the great writers shouldn’t change. We need them to enhance the quality of our life. They pose no threat. Failing to recognize that all is not as it was and having no plans to deal with it does. That’s why PDD is here.

Your children are precious. Research, analysis and critical thinking are among the most powerful tools you can bring to bear to minimize the risk that their dreams will fade away. Realizing dreams is one of the reasons we created Personal Due Diligence in the first place.

P.S.: As this post was being prepared, both Bloomberg Businessweek and The Economist ran stories about computer hacking and cyberspying. It seems incongruous that nations would risk retaliation at the hands of other nations over acquiring information while we and our children turn our back on it.

Why are we conflicted about change?

The “instinct code” in our DNA protects us from consuming food or beverages when things don’t taste or smell “right”. It’s what pulls our hand away from a hot stove in less time than it takes for the thought to form. It raises our heart rate to ensure that enough blood will flow to our muscles if we know or think that a physical threat is nearby.

These things the body does instantaneously because the potential consequences of delay are obvious and painful. Literally.

The body doesn’t respond quite so quickly when it comes to go/no go decisions about reactions to real or perceived social or business threats. The normal anxiety caused by factors that challenge without necessarily threatening life or career isn’t uncomfortable enough to warrant instant decisions. We may lose a few nights sleep over not being able to decide between a silver or black SUV, but no one will be hurt and our retirement won’t be in jeopardy. Our internal “wiring” lends itself to drawing out all but the most critical, deadline-based decisions. Like accepting an offer of employment—or not accepting it.

Our DNA hasn’t caught up with how quickly economic, business, social, technological or political change can happen. We have no defence against earthquakes and hurricanes. We don’t ship with built-in systems that tell us why they’ve starting monitoring a particular sector of the economy or the political circus and are accumulating and analyzing data. Or that thresholds are close to being reached. As currently configured, homo sapiens sapiens acts only after the lights start flashing and warning bells start ringing as situations go from good to bad to worse, or vice versa.

No one told Mother Nature that situations that change so slowly that they’re barely perceptible are worth worrying about until it’s too late, on the plus side and the minus side. With all due respect to Ms. Nature, Personal Due Diligence is far more circumspect. We tell our clients what we’re monitoring because we’re monitoring it for them. The earthquake that struck Japan in 2012 destroyed or severely damaged plants that supplied North American automobile manufacturing facilities with parts. Having nothing to build, shift workers in Canada and the U.S. were laid off. In the wake of the Kobe earthquake of 1995, a major source of supply of computer screens was crippled. Banking misdeeds and miscalculations in the U.S. in 2008 threw large parts of the world into recession.

PC manufacturers have been slow to recognize the customer appeal of tablet computers and Intel is paying the price. Despite recent analysts’ upgrades on RIM, the BlackBerry maker’s future is far from certain. The same fate may be about to overtake Microsoft: early indications are that Windows 8 isn’t exactly setting the world’s heart aflutter. According to Gartner, IDC and others, PC shipments continued to soften in the month following its launch.

PDD is wired internally to respond with flashing lights and ringing bells about what’s changing, but ours go off far enough in advance to allow you to gauge what’s changing, how fast and what that could mean to your current and future income and standard of living. We don’t presume to tell our clients what careers they should pursue, what job offers they should accept, or what education they should buy for themselves or their children. Those decisions belong to them. But we do believe that forewarned is forearmed.

Eating food that’s well past its best before date is no guarantee of indigestion. But at least it’s good to know that you have the choice before you swallow. And you’ll sleep better.