There is plenty being written about the current financial crisis and, like the political elections this past fall, it is easy to become overloaded with information.Â Obviously, there are a lot of opinions about what has happened, who is at fault, and what should be done.Â Some of the comments are driven by philosophical beliefs (for example, about macroeconomics), some by political beliefs, and less seemingly by looking at the data in longer term historical perspective.
One interesting voice in the milieu is Peter Schiff, who has a video on YouTube with over 1 million hits, where he predicted the burst of the mortgage bubble and the ensuing market crash back in 2006.Â In 2007, Schiff published a book entitled Crash Proof: How to Profit From the Coming Economic Collapse. And in a recent article in Fortune magazine, Schiff discusses his beliefs how best to deal with the crisis:Â “shrink the government radically, cancel all bailouts immediately, take plenty of tough medicine, and let the free market do its job”.
Now I obviously am not a macroeconomist, nor a financial analyst, but it seems other business leaders are calling for similar (although maybe not as stern) actions.Â Jim Collins, author of Good to Great,Â also has an interesting article where he attempts to put the current economic situation in historical perspective.Â Â Consistent with his message in Good to Great that business leaders must force their management to deal with the harsh realities they face, and not act like they aren’t there, Collins reiterates the point that the companies who survived the Great Depression and continue today remained true to their core values. Often these core values included commitment to their people, providing quality products even if it was costly, and maintaining a long-term perspective.
Often as a psychologist I assist people in dealing with their feelings.Â And, in contrast to the old days of just helping people “get in touch with their feelings”, we now know that emotional reactions are intimately linked to an individual’s expectations — what “should” happen (or what “shouldn’t”).Â So a person’s emotional reaction is an interaction between their expectation and what they actually experience — if the expectation is met, we feel pleased; if it isn’t, we can become angry, disappointed, hurt or discouraged.
I believe we are entering into an important time in recent history where individuals’ beliefs about life (about the way things should be) are going to be challenged with the reality we each experience.Â And I personally believe that a lot of the psychobabble about “perception is reality” and “reality is whatever you want it to be” will crumble in the face of the difficult times many will encounter.
There is an objective reality (and, yes, our experience of it is influenced by our perceptions and beliefs) — and the choices that we each make will have increasingly important consequences for our lives.Â Â This is true both at an individual level, as well as corporately for businesses, and also for our country.Â There are some foundational economic principles — and the various macroeconomic belief systems will be proven either true or false by the results that occur.
But at a more foundational level, the following principles seem to be true over the centuries and across cultures:
- Work is the process of providing goods or services that others want or need and are willing to pay for.Â Trying to make money fast on some scheme that is not grounded in providing goods or services ultimately will not work over the long-term.
- Spending less than what you earn, saving for purchases ahead of time, and “saving for a rainy day” (i.e. when you are not able to work) seems to be a wise strategy.Â True, you won’t be able to maximize your opportunity for gain by leveraging your resources, but you also minimize your risk if everything does not turn out as planned.
- Often circumstances bring change that was not expected, and to survive (and thrive) we must adapt to the new circumstances, adjust our expectations, and not focus on the “good ‘ol days”.Â Reminiscing about the past, and grumbling about how things aren’t like they used to be, doesn’t do much to help deal with the present.Â And you can either accept the new aspects of the current reality, and learn to deal with them, or you can try to continue to live according to the rules of the past and probably fail.
I am sure there are other foundational rules that will become evident over time.Â I would just encourage each of us to begin to re-evaluate our expectations, our beliefs about the way things “should” be, see if they match reality as we know it today, and determine if adjustments in our beliefs, habits and expectations need to be made.