Thursday, December 18, 2008

Recession Or Depression?

Call it what you will, a depression or a recession, because the economic mess almost defies description. The root cause, however, isn’t very complicated in my opinion. The whole economic meltdown was preordained when our management culture drifted away from the reality of long term consequences, and embraced the Holy Grail of quick results. In his lectures, Stephen Covey uses an analogy that relates to farming, pointing out that farmers can’t use the postponement technique of “cramming”— waiting until late summer to plant their crops and still expecting the harvest to be on time. But there’s another farming analogy. You can’t plant on time, in early spring, and expect to harvest a full crop in May because you’re too eager and impatient to wait until late fall. This latter analogy is beyond the comprehension of almost everyone in a position of management in modern America. Ours is the culture of short term strategy, and the economic mess is the result.

You didn’t need to be a MENSA to know that people who were only minimally qualified for a sub-prime loan would default when their ARM reset to a higher rate. You didn’t need to be a MENSA to know that huge, gas-guzzling vehicles would become hard to sell if gasoline prices went above a certain level. In the pharmaceutical business, you didn’t need to be a MENSA to know that huge armies of lobbyists and salesmen, along with high priced advertising on television, would cost a lot of money without creating a single new drug. The list goes on and on, but the thread that runs through everything is the failure to look beyond the short term. Here’s the scary part. The management culture in China takes the opposite road, and never loses sight of the long term consequences.

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