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Every month is a part of a repetitious cycle of, among other things, waiting for job reports and central bank reports so that investors have some idea of what to do with their money. The longer I am associated with investing and the economy from a reporting perspective, the more this cyclical waiting and reacting syndrome perplexes me. I don’t have the space to write and you don’t have the time to to read everything I have to say, but I ask you to bear with me while I make a few points. We can always debate them later.
The Deceptiveness of Job Reports
This is the time of the month that the jobs reports either light or extinguish investing fires. For the second month in a row, the US jobs report was a disappointment. Forget the figures for now. They are irrelevant. The point is that there are more people than there are jobs. Of course, the report tries to make out that the unemployment rate dropped, but, because that does not include those whose benefits have run out, it is a meaningless number. (Wow! Take a look at this report from the Wall Street Journal that was actually published after I originally published this story! I am not alone!)
The Disruptive Economy
In his book The Fifth Discipline, Peter Senge reasoned that if a company did not fix it’s problems, related outside forces would. For example, when a company fails to reduce its backorder rate, customers will eventually take care of it for them. They will resolve the problem by finding another way to get the goods that they want. That book was written in 1990. Today we are witnessing the rise of what some people are calling “The Disruptive Economy.” It is a phenomenon that most people have yet to understand. It may help to realize that the people driving the disruption call it either the “Sharing Economy” or the “Collaborative Economy.” Put simply, if major companies will not give people the kinds of goods and services the want, when and where they want them and at prices they are willing to pay, the people will collaborate to bring it to pass on their own, effectively, by starting new businesses based on heretofore untapped models.
What is that going to do to established companies that people are invested in? I would suggest that many will crumble and fall as the way of doing business fundamentally changes. I expect that companies related to consumer goods especially will feel the hurt and begin to fail first. Here is an interesting statistic. Did you know that the average expected life span of a company on the S&P 500 in 1960 was 75 years? Today it is less than 20 years, and it is on its way to 10.
Speaking of disruption and jobs, think about Steve Jobs. He was so disruptive that he changed all of our lives to some degree. Going further out on this tangent, consider also people like Mark Zuckerberg, whose dream turned into a reality just 10 years ago this month. Then, before we knew what was happening, his dream disrupted us all.
The Direction of Education
A leading Middle Eastern economic leader has created an equation that demonstrates how our education systems are laying the foundation for our economic demise.
Unemployment + Graduates Looking for Jobs = More Unemployment
Our system keeps training people to be able to find a job when the category of “People Looking for Jobs” is already full to overflowing. What are we thinking? The solution is to start training students – and adults for that matter – how to create jobs. There are already efforts among some who have bought into the formula, who are finding creative ways to do exactly that. My concern is how long will it take to generate an effective, widespread change.
The Dialectic of Investing
I submit that there needs to be a dramatic change in the mindset of investing. I think it is necessary, but I do feel positive about it happening, at least in my lifetime. From my perspective, most investing is done based upon the premise of building personal wealth. What would happen if more investing was done to further the public good by investing in new companies that create more jobs? Don’t be offended. I’m just ruminating. Perhaps the entire world economic situation would change if shareholders started thinking like stakeholders. It’s a difference of “I’m in it to win” as opposed to being all in.
I admit that I do not have the answer – at least not the complete answer. But I do believe that some of the key elements for economic recovery are in the preceding text. Heck, I’m so senile, I’ve already forgotten the question. Within an hour of reading this story, you will have also. After the weekend, it will be business as usual on Monday.
