CBS:An economic freefall:A rebound, when it occurs,will also probably be swift
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An economic freefall
A rebound, when it occurs, will also probably be swift
By Marshall Loeb: Your Dollars
CBS.MarketWatch.com
Last Update: 7:00 AM ET Jan 12, 2001 NewsWatch
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NEW YORK (CBS.MW) -- Tolstoy famously wrote that all happy families resemble one
another, but each unhappy family is unhappy in its own way.
In industry after industry, service after service, leaders lament that sales were going swimmingly
one moment and then just fell apart the next moment.
Arguably, all happy periods of economic prosperity resemble one another -- characterized by
slow inflation, low interest rates, and peace on earth. Yet each period of slump is caused by its
own quite special problems.
What makes the current economic slump different from all others in memory is the absolute
speed with which it struck.
In industry after industry, service after service, leaders lament that sales were going swimmingly
one moment -- order books were bulging, factories were humming, stock prices were rising --
and then just fell apart the next moment. Almost overnight in America's malls, free-spending
customers were transformed into tight-fisted "lookers" -- not buyers.
When the damage was done
Just when did this change occur? The time-frame varies, depending on what line of business
you're talking about, but senior officers of important corporations say almost all the damage
was done in the dozen weeks between roughly Labor Day and Thanksgiving.
And the cause of the speed of the decline seems clear: It's the rise of Information Technology.
Computers now bring to us in a finger-snap huge and targeted quantities of information on sales
and production that it used to take months for us to receive. Software delivers the hard data
and analysis of business not only to us, but simultaneously to all our competitors and suppliers
and creditors as well. In this age of instant and pervasive information, there are few secrets left.
So, when the stock market's malaise in late summer and autumn moved consumers to start
slapping their pocketbooks shut, many of the nation's retailers grasped that worrisome trend in
a flash. The retailers, in turn, quickly cut back on their pre-Christmas ordering from the
manufacturers. Seeing this, not only did the manufacturers slam on the brakes, but the bankers
and the venture capitalists went out to lunch. Capital and credit for anything chancy suddenly
became difficult to impossible to get.
We now live in an era when events unfold with Mach II speed, when yesterday's certitudes
become today's heresies, when bull transforms into bear as rapidly as rabbits gestate.
Of course, similar events have happened many times in the past, but back then the scenario of
slowdown was stretched out over many months, even years. Only two or three years ago,
business leaders and consumers from time to time picked up inklings and rumors of slumps or
surges in parts of the economy, but they gleaned nothing comprehensive or definitive -- at least
not for a long time.
Now receipts and records of every purchase by a customer, of every shipment by a supplier,
are fed into the computers, which often by the next morning have digested and disgorged any
symptoms of aberrant behavior in the economy.
Get used to it! We now live in an era when events unfold with Mach II speed, when yesterday's
certitudes become today's heresies, when bull transforms into bear as rapidly as rabbits gestate.
It's how fast we do it
The consequence is that speed is becoming an increasingly significant competitive weapon in
the world of business. It is not only important what we do, but how fast we do it. To succeed,
we need to develop a mindset to recognize change when it does occur, and a willingness to act
upon change -- quickly. Don't forget: Denial is more than a river in Egypt.
Another consequence is that if you ever expect that a turn in business will occur in the future, it
probably will indeed occur -- but much sooner and to a much more profound degree than you
had anticipated.
In short, everything happens faster than it used to.
The good news is that, just as the current economic slowdown struck with startling speed, the
rebound, whenever it occurs, will probably be swift. Because Information Technology helped
business people to respond rapidly to the first signs of weakness, we did not over-order
inventories or over-build plants and offices. The result is that we now don't have to work off
any great excesses in the economy. So any slowdown should be relatively mild and brief. |
