Conventional wisdom or prevailing ignorance. Part one
(Here we go. I've been thinking on stuff for several weeks now and have mapped out a multi-part post on conventional wisdom, which is just a nice word for herd mentality. The opinions expressed are my own, but the are based on the insights of dozens of journalists, analysts, investors, entrepreneurs and even qualified marketers, some of whom have been quoted and interviewed on this blog. I don't expect a lot of agreement here, but I ask that before you react, just consider for a moment, that I might be right.)
I was at a tradeshow recently and listened to a panel of experts talk about the state of their industry. What was entirely remarkable was that in the midst of an economic downturn; when their industry as a whole is growing slower than the rest of the economy; when Wall Street it self was calling the industry an horrible investment opportunity, these experts believed all is well in their own little section of the world.
This was not an isolated instance. Whenever I talk to someone about the state of any industry, the general belief is the industry is in trouble, but each individual states publicly that their company is doing just fine.
There are two reasons for this. First, the economy really isn't as bad as one might think. Second, people believe their own marketing. These are not mutually exclusive reasons.
The economy is not in great shape right now, but to read the media accounts we're on the verge of a sustained worldwide economic collapse. However, I've been hearing that prediction since 1970 from economists, journalists and preachers. If someone keeps saying it, eventually it's going to come true, but it's not something I would bet on. But one of the big reasons the economy is the way it is is because we don't really have much of a media left to filter out the marketing crap. All we have left is what we are telling ourselves.
At the conclusion of the panel session, through which I was consistently shaking my head in stunned unbelief, I heard several people in the audience congratulating themselves on attending such a positive event. Looking at the badges of these commentators I noticed they were all with the leading companies of the industry, and they were all marketers. These companies are congratulating themselves, as well, on completing years with between 1 and 4 percent annual revenue increases. In this same year, multiple start ups actually went bankrupt or were picked up for pennies on the dollar of investment. The market "increases" for the big companies came from, in no small measure, from the growing lack of competition in their industry.
The marketers can't see this because they have divorced themselves from the concept that they actually need third-party endorsement of their positions to know where they really are. That's why industry is cutting it's support of not only media but independent market research. Like I said yesterday, it's bad news if it doesn't line up with your world view and therefore it is not reliable.
Our economy would be much healthier if we had real analysis of the market data. At the moment, that analysis is dying a slow death from lack of support, and the closer we get to that death, the worse it is going to get for our economy. But before we get to that, we're going to look deeper into the marketing group think. Later.
Part of the denial is no doubt due to overblown media reports of crisis. It is true that we could be in for long-term deep doo-doo due to global warming, banking and investor mistakes, etc., but the problems will resemble a slow, inexorable decline, not a sudden calamity that puts millions at risk. And compare our economic status with the unwashed masses that died by the millions due to famine and no technology, in the centuries leading right up to the late 19th century. Things were comparatively far worse in the time of Malthus.
ReplyDeleteBut there is another source of denial stemming from the lack of people with broad-based knowledge of the world at large, the kind of "renaissance people" we used to admire. Folks have a very tunnel-vision understanding of the world around them. A friend in real estate cannot believe she will be impacted by the subprimes, since she works in Austin where the bubble has not completely burst. I tell her she should be paying attention to Gretchen Morgenson and others writing about banks and their structured investment vehicles -- no comprende. The sad thing is that to gain a broad-based understanding of global economic, environmental, and technological systems, we have to rely on broad-based sources like The Economist and the daily press. We're not going to gain that gestalt through looking at micro-niched blogs and newsletters that deal with our own little industries.
The broad perspective is certainly disappearing, but so too is the niche perspective. For example, who covers EDA anymore? I mean really covers it? Most - not quite all, but most - of the seasoned EDA journalists are gone. In their place, EDA vendors seem to view themselves as the replace for traditional journalist-based vehicles. Speaking as a former engineer, I don't believe their customers (chip designers and the like) are buying into this idea. But as Lou and Loring point out, EDA is now longer on the radar of most investment firms. So it may be a mote point.
ReplyDeleteThose of us who do survive the dumbing-down of American journalism will only do so by watching the big picture and acting accordingly. But who will pay for our focus on the whole system? Make no mistake, we will get paid, but not by the sponsors most readers may wish.
I agree that the media have some culpability for not covering the economy better, but most journalists are clueless about what's really going on. And more to the point, the 'dismal science' is a downer; everyone wants to gripe, but no one wants the nitty gritty details--except perhaps about Britney's tummy tuck. If if bleeds, it leads; if it's about the unraveling of the market for auction-rate securities, it's buried--if anyone can even be found to write it up.
ReplyDeleteAs for the state of the economy, I think it's pretty damn dire--and a lot of the reason more people haven't twigged to it is that the people on Wall Street and Pennsylvania Avenue who do get it are scared shitless that the current back-door bank run will spiral up asymptotically if people really catch on how bad it is.
Case in point: the Fed is now loaning $200B to investment banking firms in exchange for their worthless mortgage-backed securities. The public is now Wall Street's pawn broker. Our whole economy is highly leveraged and can't meet its margin calls. And even the Fed's intervention--backed by equally panicked Canadian and European central banks--is a drop in the bucket compared to the size of the problem that is still unfolding.
Living in a complex world isn't easy; it's a lot easier to kick back and watch American Idol over a beer. One would hope that the Democratic presidential candidates would rise to the occasion and help educate people about how things got this bad and what might be done about it. So far nada, and probably for the foregoing reasons.
Let me get in late on slapping around the EDA industry. In short, I don't think it's particularly deserved. When the Big Three (sorry, Rajiv) control 75% of the market, you have a classic oligopoly, which is how they're behaving. They don't have any real competition except each other, so they don't need to market or advertise heavily as they would if they had lots of competitors. Thus most of the remaining ads in trade mags are from semiconductor companies, who do have competion and the money to advertise--in contrast to interesting startups, who usually have great stories and empty pockets. We write about them because they're more newsworthy than a large vendor doing an upgrade.
OK, I'm out of rants for now. Love your blog, it reminds me of The Well when it first got started.
Hi John. Hadn't thought of The Well in years. I used to enjoy participating in Tony Perkin's AlwaysOn network as well, before it changed into something less friendly.
ReplyDeleteThe Feds are panicking and rightly so. Bailout at the taxpayers expense is the phase that comes to my mind.
The health of any economy is based on the mindset of the market more than anything else. If we are convinced that is sucks, then we do nothing while we wait for someone else to act. If we are convinced that everything is great, we maintain sloppy practices. The only thing that really works is a mindset that says, "it's not as bad as we think and it can only get better." It's the right balance between optimism and paranoia that succeeds.
ReplyDeleteUnfortunately what reigns in the electronics world is something between arrogance and ignorance.
Lou, I'm glad you posted on the echo chamber at the event. I think it's an even broader problem that stretches beyond media. Since industrialization, many of the major technological advances have served to isolate us from one another. From the car to portable audio devices with headphones to social network sites. Church or temple used to be a really important part of a community; today, for the few who go, it's an obligation.
ReplyDeleteWe wake up in our nice homes, generally go to an attached garage, drive to work into an underground garage and emerge at our cubes, never having left our bubble. We can spend an entire week or more in this fashion, without once breathing fresh air or encountering a pleasant or unpleasant person on the street, a crucial serendipity of life.
So people are building their own "communities," which is supposed to be important today--the future if you will. Most of the people I work with don't read newspapers or "serious" magazines. They follow news websites related to their jobs. Few seem to have an interest in the policies and politics that shape our lives.
This is the norm. It's not just us, but this is our future. The ones paying attention are us old bastards. My 85-year-old neighbor stopped me on the street the other day to say he enjoyed reading my wife's letter to the editor in the local paper.
Maybe it was ever this. But given what's going on today, not being aware is going to lead to an entire country awakening from a pleasant dream to a long, very real, nightmare.