The Challenges of Good Times and Bad
The Economist: Balancing the two extremes faced by most economic entities
To everything, turn, turn, turn. There is a season, turn, turn, turn.” These lyrics to the 1960s band The Byrd’s classic song reminds us that life is a cycle and our “purpose under heaven” is subject to change. I’m not sure our core purpose must change, but our mission at any given time is dynamic, and there is “A time to build up, a time to break down.” One of my daughters reminded me of this once when she was struggling with her career path. I was overwhelming her with data and analysis, until she looked at me and said, “You know, Dad, you’re shaking my confidence.” She had to solve the problem and needed a positive listener – not an analytic economist.
The song juxtaposes many of life’s extremes. Let me focus on two extremes faced by most economic entities (individuals, households, organizations, communities and nations) at some point. Through life, we experience both the highs and lows. If the typical economic condition is marked by steady sustenance or modest profits, the lowest point is when our financial survival, and perhaps physical survival, is seriously threatened. The highest of economic highs are dominated by the generation of substantial surpluses – far beyond what is needed for sustenance.
The economic lows might involve unemployment or disability for an individual or family; the loss of a major customer for a company; prolonged drought or major employer closure for a community; or a financial crisis or war for the nation. Sound familiar? When our economic life crashes, everyone impacted is stressed, and our ethics are challenged. If the low is persistent enough, mental fatigue can set in, and we become overly pessimistic – interpreting even positive events negatively. We learn much about true character and resiliency during tough times.
The high season is when good news just keeps rolling in. The season is marked by a new high-paying job or contract. We find ourselves owning new markets or territory as the competition has surrendered. For communities, one major employer after another announces expansion. At least for a short period, substantial surpluses are generated almost effortlessly. What’s fascinating is how the surpluses are used. Watch the surplus to see what is most valued. Is it saved, invested to frame the future, or spent on current consumption, executive salaries or higher stock dividends?
Lows are not the time to let the inner voice beat on ourselves. Reality is already doing a good job at that. The worst of times require we improve our economic situation immediately – often with radical change, whether it be moving, implementing layoffs, renegotiating debt, prioritizing public services, etc. Often, we will take inordinate risks because we have nothing to lose. Good leadership during the hardest of times keeps us focused on a path forward to tomorrow and encourages us to persevere. Hopefully, as our season turns back to normalcy, even if under a totally new paradigm, we can look back with a sense of both pride and humility.
The good times are more perplexing than the bad. If bad times are “a time to build up,” then good times may be the “time to break down.” This is like the notion “if it’s not broken, break it.” Despite the demands to keep up with workloads and accept expanding responsibilities, high-performing individuals, families, teams, organizations and communities take advantage of the good times to be self-critical by asking how they can do better and who they are. They take risks, not out of necessity, but to grow at their core or to experiment incrementally. They use surpluses strategically —anticipating continued turns of the season. If especially bold, they listen to the naysayers to see what truth might emerge. Research suggests that companies that share the surpluses with employees during good times find greater commitment to the organizational vision whether or not bad times return.
Let me mention a few champions of my point. There is Fort Collins in its pursuit of the Baldrige Award. Steamboat Springs with its focus on elevating the Yampa River to help broaden and diversify its future. Manitou Springs’ use of marijuana taxes to catch up on deferred infrastructure investments and to create incentives to make sure private tourism assets live on. I’m sure there are many more communities taking advantage of the good times, and certainly there are businesses, nonprofits and households doing the same by acting contrarian and singing either to The Byrds or to Warren Buffett with his popular refrain, “Be fearful when others are greedy, and greedy when others are fearful.”