Saturday, January 31, 2009

Go forth and buy Starbucks, Hummers and other shiny objects

I just bought a new PC. Actually, it was an old PC - a refurbished Dell laptop. I spent $400 on a beat up brick, instead of, say, $1,900 on something shiny and new for a few reasons. One is that I'm a terrible maximizer and am still trying to decide which shiny and new machine I should get. Another is that I actually need two machines - one shiny and new, but also a stopgap machine for one of my team while her Lenovo goes back for repair. And the Dell is a perfect stopgap machine. But most important of all is this:

I'm scared because of the "The Economic Crisis"

That reason is telling; I think, anyway. As I explained to my team in Verilab's Austin office yesterday, January 2009 feels much the same as January 2008, or January 2007. If anything, January 2009 actually feels better than those past years. Of course fortunes can change fast for a small firm, but that has nothing to do with 2009. Being a small company means you're always at risk from the big wave, let alone the perfect storm. And so if I keep my eyes purely on the data that immediately affects me, I cannot yet see a problem worse than the problem of being a small, international firm working in high tech.

So, why did I allow "The Economic Crisis" to affect my buying behaviour? The world of PC sales is $1,500 shorter than it would have been had I, You-Are-Already-Dead-Kelly, had the balls to buy a new machine. Why did I chicken out? Well the reason is, I'm scared not because I have anything yet to be scared about, but because you're scared. I'm reacting not to a softening sales pipeline, or to all my consultants being emptied from their clients, or to a sudden ban on the use of SystemVerilog for chip verification. I'm reacting primarily to the fear shown by others. You, and your fear, is the problem. Of course, you in turn are scared primarily because your friend is scared. And your friend's scared because his cousin in Austin was laid off because his Austin employer was scared because his next door neighbour, Tommy Kelly, was scared. Repeat until sick.

Now I'm not denying that there are real economic problems. As Kipling never said:
"If you can keep your head while all about you are losing theirs ... you may have misjudged the situation"
So bad stuff is definitely out there. Toxic assets are, well, toxic. Companies large and small are in danger, jobs are being lost, and home loans foreclosed. Aaaah! But is it reasonable to believe that I am not alone in reacting not to actual observable problems but merely to other people reacting to something? Is it reasonable to believe that a large part - maybe the largest part - of the current problem is not "real"?

Let's do some math(s). There are, what, 300 million people in the US? Let's say 200 million of them are sufficiently afraid of their neighbour's fear that they are not buying as much stuff as they otherwise would. Let's say I'm an average non-spender. So, some are not buying a Starbucks for $4.00, while others are not buying a new Hummer for $60,000. Just for argument's sake, assume the average non-spend is $1,500. Two hundred million Americans each didn't spend $1,500 dollars they otherwise would have. That means $300 billion dollars of non-spend. For no reason. $300 billion dollars of trade that would have happened, didn't happen, because of fear triggered by someone else's fear.

Suppose we decided to actually advance in the face of fire. Instead of battening down the hatches we each decided to buy something that we we knew we were putting off only because of the fear. What would happen to the economy?

I'll leave you with the best video I've yet seen explaining the crisis, and particularly this aspect of "market sentiment".

Meantime, I'm off to buy a shiny new PC!

Monday, January 26, 2009

2009 - Advance In The Face Of Fire

Just after starting Verilab, I dabbled in body building and weight training. One evening, after a session of leg exercises, I asked a much fitter and more experienced friend the following question:
"When you are working at the very limits of your ability, do you think you find squats easier than I do when I'm working at my limits?"
My assumption was that since he was better trained than I was, with better technique, that he'd find his most extreme workouts easier than I would mine. And so his answer surprised me:
"After a max leg workout, I sometimes throw up. I can barely walk, and have to hold onto the wall to stop myself from falling down."
There was no conceit in his answer. He was simply stating it as it was. Working at the limits of his ability, he put himself through a far more punishing and painful routine than I did. I realized that a major success factor in body building was the mind. It was true that my friend Marc was physically better trained than I was. But the difference in our respective mental training was even greater. He had trained himself to push himself harder than a normal person (a.k.a. me) thought was possible. He had trained himself to know that when the pain is so great that you think you are damaging yourself (and in serious weight training you often are), you can still push even harder.

It reminds me of a scene from the movie "Bravo Two Zero", in which a British SAS patrol encounters an Iraqi force. True or not (the details are disputed), the account is impressive, particularly where once the attack is underway, the SAS start to advance towards the numerically superior opposing force. Most normal humans would have cowered in the dust, but not the SAS (2:06 in the following video):

Again, the mind is key. McNab's character in the movie admits that he was scared. "Of course you're afraid. Anyone who says they're not is either lying or needs to see a shrink." But when the crucial moment arrives, past training comes to the fore. The fear remains, but the individual is able to focus on what needs to be done. The same happens in a scene I mentioned before, in "Band Of Brothers":

The difference between Blithe and Speirs was not the presence or lack of fear or of real danger. The difference was in their mental ability to control that fear, and to operate despite that danger. I think there are lessons here for the coming year. True, running and screaming war cries at a global economic crisis aren't going to make it go away. Unlike the Iraqi force, toxic assets aren't going to turn back into high grade investments just because we keep our nerves. But scaring the enemy is only one reason for advancing in the face of fire. Another is the effect it has on you, the underdog; the one being attacked. Like the body builder, you often don't know how far you can push yourself until you try. And a third reason is the training effect. This is not the final economic crisis. We will come through this, and there will be others in future. So this is a rare opportunity to train and learn. We should use it.