With just two months into this 2009, we already have a flood of big stories already unfolding for 2009 - Obama's first 100 days, new even lower market lows in this economic crisis, bailouts and stimuli, and just discovered scandals - and yet we may be too preoccupied and likely will miss the biggest story that has yet to happen: the moment the economic reset begins.
The majority of us are (and should be) bracing for continued economic volatility at least through the first half of the year. Historically, even when markets get better, the economy lags. In a recent meeting for my investment firm, Cue Ball, I asked one of the most prominent venture capitalists in the country when he thought our industry would start swinging back. His response captured the right sentiment, "I think it has to finish swinging out before it can start to swing back."
While pundits will pinpoint the "bottom" with great certainty ex post facto, let's make one thing clear, no one, but perhaps a higher being, knows how long or how deep this economic downturn will be. That caveat said, the optimist in me believes that we will begin the swing back towards the later part of 2009. Why? Because the majority of doom and gloom reports believe it will take much longer to get better.
Why? I believe that most current sentiment exaggerates the immediate short-term trends at the expense of long-term opportunities. The question for me is that whenever the economy turns, will we notice it, and if so, will we do anything about it?
Just as few of us saw this economic mess coming, few will see it improving. The beginning of a swing back is not that palpable. Any recent signals and economic stimuli to quell its quake have at best given temporary reprieve, only to be met with whiplash volatility of "another bad news" issue - another company downfall, another bailout, another scandal, another state of economic emergency. When the turn happens it will probably be a quick and jerky against a period of protracted indifference, making it tough to see and feel. The trick is not to determine that bottom inflection point, but to recognize that between now and a good part of 2009, that we may be in a period of as much opportunity as uncertainty.
Last week, I came across on the blogosphere, the term "macromyopia" - the notion that it is human nature to over-emphasize the short-term and underestimate the long-term. Macromyopia is trendier jargon on "Amara's Law" which I first heard back in the day of Bob Metcalfe's Agenda conferences. I have recently wondered if this is beginning to look like an anti-irrational exuberance era. Are we approaching a macromyopic level of absurd apathy? Don't get me wrong. The market needed to seriously reset itself given the credit craziness and unrealistic expectations for growth. But we run the risk of creating a self-fulfilling negative mindset concomitant with actions that prolong distrust and unpredictability. While in the short-run we will see more macromyopic behavior or market and economic apathy, my long-run optimism remains resolute. As Buffet has preached, "in the short term the market is a voting machine, and in the long term it is a weighing machine." Let's hope the weighing begins soon.