Fear in a Down Economy

Fight or flight.  It’s our deepest primal response to fear.

And isn’t there a lot to fear from the economy right now?  Unemployment is over 8% nationally and as high as 12% in some urban areas like Los Angeles.  Retailers aare going bankrupt. Houses are being foreclosed upon.  Newspapers are in danger of disappearing.  Banks are in trouble.

So what do we do?

We stop spending.  We stop buying.  Investors pull money out of the stock market.  And our worst fears are realized.  We pull money out of the stock market and it drops.  When it drops, companies go into survival mode.  For most companies, that means cutting the one controllable expense they do have:  Payroll.  So the layoffs begin.  And the downward spiral continues.

Time to jump off the ledge, right?

Not quite.  Pull yourself back from the brink and consider this story. 

A hot dog vendor sold the best hot dogs in town.  His food was legendary.  People lined up around the block to have one of his hot dogs.  He did so much business that he had to expand to meet the demand.  So he opened a resteraunt and it grew.  Soon he had to open a second resteraunt to make his customers happy.  He made enough money to send his son off to a fine university. 

The son graduated and came back to help the father run his business. He told his father that they shouldn’t be expanding because there was a depression out there.  So they stopped expanding.  Business started to slow so the son told his father they had to use  lesser quality meat to save money and protect profits.  So they did.  Then business slowed again.  Eventually, they closed the second resteraunt and profits fell again. The son’s prediction of a failing economy became a self fulfilling prophecy.  The father had been oblivious to the economy.  He knew how to make great hot dogs and that’s what he did.  When fear came into the mix, he changed the way he did business and began to fail.

Retailers are closing stores.  It’s true.  But the truth of the matter is that retailers close stores EVERY year.  That’s how good business is done.  You close the stores that are not making you money and you open others that you think will make you money.  So is it cause for panic?  No.  Nothing is cause for panic.  No one thinks rationally or positively when they panic.  Ask McDonald’s.  They recently reported a net income of $946 million as compared to a net income of $762 million a year ago.  Their business isn’t in a slump.

So what should we do?

We should relax.  We should act out of basic common sense not fear.  We shouldn’t spend more than we make.  That’s common sense.  Abandoning that is part of what put us here.

We should set at little something aside for a rainy day.  That’s ancient advice but solid. 

Neither a borrower nor a lender be.  Isn’t that what Benjamin Franklin told us?  Our credit woes also drove us here. 

Is it easy? 

No.  But it is something we CAN do.  And certainly nothing to fear.  This will pass.  Tough times always do.  It’s how we handle ourselves when things are tough that defines who we are.  Anyone can be brave when things are easy.  It’s times like these that call on us to be strong, to believe in ourselves and do something about it.  Make hot dogs.  Sell hamburgers.  Get another job.  Don’t run from it.  It’s easy to hide but not very productive. So take a deep breath and let’s see if we can save ourselves.

Fight or flight.  Which one do you chose?