With the benefit of hindsight, we can see that we've been defying gravity for a long time. Probably since the days when Ronald Reagan and Margaret Thatcher lifted our spirits with passionate, well-delivered rhetoric extolling the benefits of deregulation, supply-side economics and the free marketplace.
In the span of my working life -- especially in the past decade, as I've come to run one of the largest multinational marketing communications companies in the world -- I've witnessed our economy rising to the highest heights. Largely on a bubble of credit, it turns out. Over the past six years, as I traveled the world and talked to CEOs and marketers in both developed and emerging countries, one assumption consistently prevailed: More is more.
In Dubai last month, the mood reminded me of a trip I made a few years ago to Cape Coral, Florida -- a poster child for the Florida real estate bust since even before the Florida market went bust. Who would have believed Dubai could be the new Cape Coral? "More is more" suddenly feels very yesterday, even in gold-plated Dubai.
The fact is that we largely lost the ability to differentiate between solid ground and pie in the sky. Rightly or wrongly, despite the aftermath of 9/11 and a quick blip following the dot-com meltdown, we grew comfortable at those extreme heights. In the U.S., we started to believe in our hopes and dreams to such a degree that we took them as absolute truths: Every individual can be a homeowner, whether he can afford it or not. A college education will better your life and buy you a ticket to a richer, more successful future. The stock market will rise. Interest rates are solid. Anything less than double-digit growth year-on-year is woeful underperformance.
The list of assumptions is startling in its naïveté -- and its optimism. Glass half full. Tomorrow is a brighter day. Good and plenty.
Now that the bubble has burst, our confidence is shot. Who among us knows what solid ground feels like? It's no wonder the outdoor industry is bullish. Trend analysts predict families will take their holiday by pitching tents at nearby campgrounds -- so they can literally stay close to home and down to earth. The symbolism is dramatic, and maybe even dreary, but the message is profound. None of our current leaders -- in government, business or elsewhere -- has faced a challenge of this magnitude before. No one of the current generation truly has the experience to say with certainty, "This is solid ground."
Today we are seeing the intimate, delicate interdependence of fundamentals and sentiment in the economy. The fundamentals are important; we need to seek out businesses that offer real value, companies with healthy cash reserves, etc. But it's clear that how people judge those fundamentals and how they value them is critically dependent upon sentiment. Sentiment reigns. Financial markets both reflect sentiment and drive it, in a volatile feedback loop.
Back before the subprime crisis hit in earnest, before the real estate market tanked, warnings were dismissed as doom-mongering. Naysayers were written off as quacks. My brother, a successful investment manager who often warned of a coming crisis, was the yang to my optimistic yin. Sentiment was blindly bullish. What a difference a quarter makes -- now, encouraging news is dismissed as whistling in the dark. Sentiment is determinedly doom-focused.
In this environment, public commentators and voices of authority face a serious challenge. They have to recognize the limits of their understanding; they must be real and realistic. This includes business leaders, academics and community organizers -- as well as bloggers, who have influence over a dedicated audience. We need to establish a clear divide between stream-of-consciousness speculation and informed conjecture.
Through today's media, everyone can broadcast their opinions. But in these delicate, anxious times, it's all too easy for rash opinions and hyped-up punditry to become part of the problem. Every dramatic word and image reinforces the fearful sentiment helping to drive this crisis. Regardless of who is to blame, it's profoundly unhelpful and potentially pernicious to use accusations as ammunition for ideological firefights.
The newest challenge is for each of us to understand when we can make a difference by adding to the dialogue. Words are weapons -- not as toxic as subprime mortgages but potentially destabilizing, or at the very least, annoying. One person's words of doom and gloom can ruin someone else's day, sapping confidence and nudging sentiment in the direction of depression. (Occasional gallows humor aside, extreme negativity is counterproductive and won't help anything improve or enable anyone to find lasting happiness.)
We need two interconnected things from the incoming Obama administration, as well as from leaders of other countries and bodies, such as the IMF and the United Nations, and leaders of the business community. We need levelheaded, timely competence and cooperation, and authoritative words and deeds that can calm sentiment and halt the panicky stampede. And from marketers, we need restraint and respect for the consuming public, who feels that right now, less is more. People are seeking fair prices from the brands and products with which they keep company, along with an appreciation for social values.
In all walks of life, people will increasingly want to tone down the rhetoric and dial into enlightened conversations. As noted by the BBC recently, it's the dawning of an age of smart talk, and perhaps a time when confidence can be re-inspired.
The hope is that the new year will bring three shifts: 1) More straightforward, articulate exchanges in the marketplace and between every one of us; 2) A greater responsibility throughout commerce, with fair play and respect permeating messaging and relationships, so that people feel genuinely connected to the companies they do business with; and 3) The end of the assumption that everyone has a right to instant gratification.
New leaders can inspire us with pragmatic optimism, demonstrated by what they do and how they live. Discussing good works is fine, but what counts will be values-driven decision-making that puts the communal good, good works and good results at the top of the agenda.