June 1998 • Volume 8 • Number 6
The Customer Connection:
The New Economy
By Tom Wallace
As I write these words, the Dow Jones industrial average is north of 9000; inflation is non-existent; unemployment is low; and corporate earnings continue to grow nicely. The great economic boom of the 1990s continues; and at this point, the end is nowhere in sight. The United States has regained its place as the No. 1 industrial nation in the world; we did not get into another war with Iraq; we've weathered the Asian economic crisis; and peace continues to spread around the globe — even in such unlikely lands as Ireland and Korea.
Some people are having a problem adjusting to this. They can't understand why the stock market is behaving so bullishly. They still believe that Japan and Germany are the world's leading economic powerhouses; they don't realize that the United States has regained its role as the premier industrial nation in the world. They keep waiting for a recession, or worse. These people have experienced the end of the Cold War, the computer revolution, the total quality revolution, and the substantial productivity gains we've made in this country — but they're having trouble linking those events with where we are today.
It's Different Now
Yes, Virginia — there is a New Economy. It's different from the old one. We're right in the middle of — to use an overworked phrase — a major paradigm shift; and, as a result, the old models simply don't apply. Example: For at least the last half dozen years, the numerous bears on Wall Street have been predicting doom and gloom in the form of a major market turndown. It hasn't happened. How could so many seemingly intelligent people be so wrong for so long?
Quite simply, they were applying yesterday's framework (the old economy) to today's situation. It didn't work. Market timing — an investment approach that attempts to predict when the market will go up and down — has taken a terrible beating in this market, compared to other strategies less dependent on past history. Louis Rukeyser, writing in his investment newsletter several years ago, said it well: "I want to begin by boldly challenging the previously unchallengeable. My thesis for you today is not only that this time is indeed different — and that the most successful investors are those who can adjust to this unorthodox reality."
With the changes we've experienced over the last 10 to 20 years, how could this time, and the times to come, not be different? It's a whole new ball game, and we need to start thinking differently. The old models will lead us to do the wrong things, make the wrong choices, and not take advantage of the wonderful opportunities we have — and I'm not talking primarily about investing, but rather how we run our businesses, raise our children, and live our lives.
New vs. Old
The contrasts between the New Economy and its old predecessor are many, and they run deep. Silicon Valley venture capitalist John Doerr, interviewed in Business Week (March 16, 1998) made a clear distinction between the two, and I've capsuled his comments in Figure 1.
|
|||||||||||||||||||||||||||
Why the U.S.?
So the New Economy is alive and well, and it's living mainly in the United States. Why here instead of another part of the world? First, because it was born here. Second, look at the list of attributes in the right-hand column in Figure 1. I believe that we as a nation are better prepared to operate in that mode than any other industrial power in the world. Western Europe, with the notable and happy exception of the United Kingdom, continues to struggle ineffectively with regulations and red tape. These economies have had little job growth (in the private sector) over the past 20 years, and that contrasts starkly with our stunning job creation record here.
Japan is mired in a morass of protectionism and bureaucracy, which is serving as an enormous drag on what once was the world's most vibrant economy. Over the long run, a country's stock market tends to be a pretty good barometer of its economic success; people put their money into what they believe in. In that light, to get a feel for how far the U.S./Japan differential has shifted, look at Figure 2. These numbers indicate that the Japanese stock market has lost almost half of its value in 10 or so years, while the U.S. stock market has tripled in value during that time. Saying it another way, investors today have half as much confidence in Japan and three times as much in America.
|
|||||||||||||||
Are we lucky or are we good? Well, some of both. We're lucky to live in this wonderful country. We're good in that we work hard; we're smart (sometimes); and our culture encourages the creative chaos that's inherent in free enterprise. Sometimes we go overboard. Sometimes we forget that the marketplace is not all wise and thus should not be the sole determiner of everything that happens in our society. But in general, we seem to muddle through pretty well, and our transition to the New Economy is a good example of that.
Don't Let Up
If we keep our eye on the ball, do not get complacent, and continue to run lean, we have the opportunity to leave a great legacy for our children and theirs: a federal budget that's balanced for more than just a few years; a social security system that's viable and efficient over the long run; a world-class education system; and opportunity and good jobs for everybody, including the disadvantaged. We can do this. It's within our reach. The New Economy is the foundation upon which these achievements can be built.
I really wish I were 30 years younger. It would be great to be starting out today rather than in the smug, arrogant, risk-averse, and not very efficient old economy of the 1950s through '70s. The mind-set resulted in getting hammered by foreign competition, enormous job loss, urban decay, and a diminished quality of life. Let's not go through that again.
Our leaders today, in both the public and private sectors, went through those bad times, and I believe they learned their lessons well. As a group, they're doing a wonderful job. But how about you younger folks just getting started? To you I say please do your best not to become complacent. Don't take the New Economy for granted. You're being given a wonderful opportunity, but to keep it working will take lots of hard work, creativity, and — last but not least — flexibility. It will be different. It already is.
Tom Wallace is an independent consultant based in Cincinnati. He is the author of "Customer Driven Strategy: Winning Through Operational Excellence" (1992) and editor/author of "The Instant Access Guide to World Class Manufacturing" (1994). Tom is a Distinguished Fellow of the Ohio State University's Center for Excellence in Manufacturing Management.
in the appropriate place on the Reader Service Form
Copyright © 2020 by APICS — The Educational Society for Resource Management. All rights reserved.
Web Site © Copyright 2020 by Lionheart Publishing, Inc.All rights reserved.
Lionheart Publishing, Inc.
2555 Cumberland Parkway, Suite 299, Atlanta, GA 30339 USA
Phone: +44 23 8110 3411 |
E-mail:
Web: www.lionheartpub.com
Web Design by Premier Web Designs
E-mail: [email protected]