Sunday, July 25, 2010

Following John Henry Into The 21st Century

The entire globe is in the midst of an economic upheaval. Where will it end?

No one knows, of course. But many people, especially in the U.S., are searching for ways to stem the tide of global change. What is the likelihood that the course can be reversed?

For a possible answer to that question, I’d like to borrow/steal an illustration from Daniel H. Pink’s excellent book A Whole New Mind: Why Right-Brainers Will Rule the Future:

You’re no doubt familiar with the American folk tale of John Henry, the mythical “steel-drivin’ man.” According to the legend, John Henry was a strong, hard-working laborer who used a 20-pound hammer to drive spikes in constructing a railroad line. He was famous for his unmatched speed and strength.

Every school kid knows the story: One day, John Henry’s employer brings in a steam-powered drill and announces that it can do the job better, faster, and cheaper than any man, even the great John Henry. A race is arranged. A fierce competition ensues. After falling behind, John Henry summons a superhuman effort and rallies for the victory. But the effort is too much for the big man, and he dies “with the hammer in his hands.”

The legend of John Henry gained popularity at the dawn of the Industrial Age. It succinctly expressed the anxiety of a culture struggling with the automation of traditional labor. That culture gave way to mass production, which gave way to a knowledge- and service-based economy in the late 20th Century.

Those transitions were traumatic and painful to the people they affected. But no matter how hard those people may have tried, they—like John Henry—could not stop the change from taking place. And, just like us today, they had no way of seeing what was coming next—they only knew what they were losing.

Ultimately, each painful transition brought about advancements that benefitted us all.

As we observe the present-day transition from the Information Age to what Pink refers to as the “Conceptual Age,” it is natural to experience angst over what we might be losing. But at the same time, we might balance that angst with a sense of hope that—if history is any guide—we just might be stumbling headlong down a bumpy road that leads to a better world.

Sunday, July 18, 2010

What Are We Thinking?

2010 marks the 25th anniversary of the Certified Financial Planner Board of Standards, which grants the CFP® certification and upholds it as the recognized standard of excellence for personal financial planning. To mark the occasion, the Board recently conducted a survey of 1,002 Americans to gauge their opinions regarding the economy, financial regulation, and their own personal financial situations.

Americans are keeping their optimism in check and preparing for a long slow return to growth, according the poll:

  • Nearly two out of three Americans (65 percent) are more concerned about their finances today than they were at the beginning of the financial crisis two years ago.
  • A bit more than a third of Americans (37 percent) expect to see their personal finances improve in the next six months, versus less than half (46 percent) who expect to hold onto what they currently have, and 16 percent who expect to lose money.
  • 80 percent of Americans say that Congress and regulators have not done enough “to deal with the financial market problems and their impact on American investors.”
  • A bright spot in the findings: 44 percent of Americans expect the U.S. economy to improve in the next six months, while only 28 percent expect things to get worse. A smaller group (22 percent) anticipates no change in the economy.
  • When asked to describe how they feel about their personal finances, the #1 response from Americans was “cautious” (33 percent), followed by “calm” (26 percent), “concerned” (25 percent) and “hopeful” (25 percent). (Multiple responses were permitted to this question.)
  • Interestingly, ethnicity seems to bear on the perception of the prospects for the economy, with just 38 percent of whites expecting the economy to improve, compared to 51 percent of Hispanics and 74 percent of African Americans.
The survey found the following about Americans’ attitudes toward financial planners:

  • More than two out of five Americans (43 percent) think financial planners are now “more important in the last two years since the start of the financial crisis,” compared to about a third (36 percent) who see no change, and 14 percent who now see planners as being “less important.”
  • Overall use of financial planners by Americans has remained almost unchanged during the first two years of the U.S. financial crisis – starting at 29 percent compared to 28 percent today.
  • Of those who have started using a financial planner since the start of the financial crisis, nearly a third (31 percent) say they have done so because “I felt like I needed more financial guidance during these difficult times for investors.” A bigger percentage of those in this group (44 percent) said they have started using a financial planner during the last two years for reasons “unrelated to the financial crisis.”

For some reason, there was one question that asked respondents to describe the economy as an animal. The answers were actually quite interesting and revealing: they tend towards slow, lumbering animals like sloths, bears, turtles, and elephants, while few choose the iconic symbol of confidence, the bull.

Not sure what all this tells us beyond what we already know, but I thought it was interesting nonetheless.

Have a great week!

Monday, July 5, 2010

Dueling Views of the Economy

I hope your 4th of July was as good as mine. This week’s video concerns the perils of forming strong opinions about the future of the economy. If you’d like to read the results of our recent survey, they are below the video link.
We had a very high response rate to the survey; the results were gratifying as well as edifying. 95% of respondents read all or part of each week’s economic update email. In addition, 84% said they liked the video updates.
The comments were very interesting and presented me with some challenges. There were a few comments indicating that the videos were too long; others thought they were too short; and still others thought they were just about the right length. In addition, there were several useful suggestions for improving the technical parts of the videos.
Finally, there were some excellent suggestions for topics to cover. Frankly, between the topics I’d like to cover, the topics that have been suggested, and the topics that come up each week, I have more than enough to write and talk about. The challenge is to decide whittle it down to one a week.
Thanks for the feedback, and have a great week!