I recently read two articles that, depending on your point of view, could be taken as incredibly depressing or as a huge source for optimism.
The first is by Matthew Parris in the Times of London. I don’t agree with much of it and you may not either. But this part stood out:
“This recession is not a failure of market economics. It is a reassertion of market economics after a decade in which we paid ourselves more than we were producing, and funded it precariously and temporarily by complicated credit instruments that it took a while for the market to rumble. Now a prosperity that always baffled ordinary citizens has collapsed.”
Up until just recently, we had enjoyed almost 25 years of mostly interrupted financial success. But didn’t you have the sense a few times, during that run, that things were too good to last? The signs of what Parris calls “a long run of irrational confidence” were everywhere – none more so than in real estate.
You cannot count on a “sure thing”
A couple years ago I traveled around the country marketing at real estate trade shows. One of the exhibitors rented eight spaces (cost per show: almost $40,000) to push their developments in Cape Coral, Florida. The not-quite-explicit message was that Cape Coral was a sure thing – a guaranteed return. They couldn’t say that, but they said everything except it.
All those people who bought in Cape Coral must be feeling hopeless now, since real estate values have dropped like a rock and there are almost as many foreclosures as there are homes for sale.
That feeling of hopelessness was echoed by Daniel Gross in the online magazine Slate.
Have Americans really given up on the economy, as Gross suggests? I think many have. Even if your own situation isn’t too bad, it’s depressing to drive by empty storefronts, hear about your neighbors being foreclosed, and read about going-out-of-business sales.
As real estate investors, to some extent, we are always riding the tide. Sometimes it floods, sometimes it ebbs. Matthew Parris suggests that our economies may deteriorate or stagnate for many years. Daniel Gross thinks most Americans implicitly agree with Parris.
Action, not complacency, will get us out of this
So what are we going to do here? We can either ride the tide (depressing, passive) or we can build the tide. Building stuff! It’s the only way we’re going to get out of our personal depressions, and the only way to get the country and the world out of its global decline.
Don’t just invest and hope for the best. Give up that feeling of helplessness. Instead, create something new, or find ways to make your current projects work better.
I’ll give you three examples. I have two things that are marvels of technology, and I’m building the third. The first two are my iPhone and my RC helicopter. Imagine how the engineers at Apple felt when they created the prototype iPhone. Their minds fully concentrated by their efforts, they had little time to waste fretting about home prices or the stock market. Moreover, their focus paid off financially – they work for a company that remains highly profitable. Should any of those engineers seek to change jobs, having “iPhone developer” on their resumes will be very valuable.
My RC helicopter cost about $125 and is much simpler to fly than the $1000 model choppers of 20 years ago, but it can do just about anything they could. Its designers no doubt had a great time designing it. They also created a whole new market and became rich in the process.
The third marvel is, or will be, my real estate software. I’m going to keep working on it until it’s as good as it can be. Will it be successful in the market? I think so, or I wouldn’t do it. But the joy I get from making the software work is free. And I do expect that the product I’ve created will make me much wealthier in the end. By building a better product, I’ll build a bigger market.
So this is my disagreement with Matthew Parris, and the reason why I feel optimistic, not depressed, after reading those two articles. I’m not going to ride the tide, I’m going to create a newer and better one. If my competitors go out of business, that will open the door for me to take over their customers. Even if the overall economy doesn’t improve for many years, I can grab a much bigger piece of it by creativity and hard work. You can do the same. However, you will have to work harder and smarter.
And while you’re at it, please give up this idea of the “we” economy. The only “we” you should worry about is yourself and your dependents. The global economy is really millions of small businesses and thousands of big ones, made up of billions of individuals. When times were good, many of them grew complacent. Now that times are tough, many of them are miserable.
However, in every tough economic period, some companies have prospered. When things started to improve, they really prospered because they had kept their focus during the hard times, and because many of their competitors had simply given up. In fact, their efforts to make life simpler and easier for us, while simultaneously earning fortunes, helped get us all out of the tough times and into good ones, because they grew and hired.
I don’t know what you’re going to build, but I do know that time you spend making your products better or your processes simpler will not be wasted. Suppose you just want to maintain or grow your properties. How can you make them more energy-efficient? More appealing to tenants? Cleaner? Safer? Cheaper to operate?
That’s not “building” in the traditional sense, but it’s a long way from passivity. You’ll feel better while you’re putting in these efforts and you’ll prosper more as a result.