In 2007, house prices were again rising at 12% per annum, way ahead of people’s pay packets. All forecasts for 2008 were that we’d see more of the same. Who made those forecasts? The experts. The people in the banks and building societies who earn millions in bonuses every year.
So how come they get paid so much when they are so bad at their jobs? The credit crisis was pretty obviously going to happen, it was just a matter of when: house prices had become unaffordable for first-time buyers, personal debt was at an all-time high.
So now the same people are warning us about a recession. But just because the average business is going to be affected badly by it, doesn’t mean that you have to be. Two of my clients, both mortgage brokers, posted really strong figures for July. Meanwhile other brokers struggled. The difference? Focus on the things that matter.
Please ignore all the commentators, business news and bankers’ weasel-talk. Just keep making your business better and you’ll beat them all into a pulp.
Sadly we humans have a habit of behaving like sheep. At school we got ridiculed if we were bright and asked too many questions. Meanwhile we were ridiculed if we were a bit slower to learn and needed more time to study. So what happened? The bright kids slow down to mix in with the "pack" and the slow kids work harder to catch up.
The end result is a whole bunch of results clumped in the middle – breeding a bunch of average performances and encouraging us to be average for the rest of our lives. Then when somebody does well, talk behind their backs about how they must cheat, lie or steal to do so well. Ever hear about somebody being filthy stinking rich? How good are those words to describe the rich – filthy, stinking? Just trying to pull them back to average, eh?
It’s refreshing then to read about Nassim Nicholas Taleb, an author and philosopher who despises the economists and bankers who spout their predictions and models as facts. I was riveted by a long interview with Taleb in The Sunday Times because he clearly has his feet rooted in reality, rather than getting wrapped up in the twaddle spoken by bankers and corporates.
He made $40M in the 80’s by going against the flock. He advises against investing in the stock market, but to put 10% of your savings into high-risk ventures that just might turn out to make you very rich one day. I love his philosophy, because I despise the mentality that being average is a good thing. It’s not good. Nothing exciting happens to average. It’s living out Eastenders in real life. It doesn’t have to be that way!
Ah, it seems I’m on a bit of a rant. I shall stop and leave you with Talebs rules of life from the Sunday Times article
1 Scepticism is effortful and costly. It is better to be sceptical about matters of large consequences, and be imperfect, foolish and human in the small and the aesthetic.
2 Go to parties. You can’t even start to know what you may find on the envelope of serendipity. If you suffer from agoraphobia, send colleagues.
3 It’s not a good idea to take a forecast from someone wearing a tie. If possible, tease people who take themselves and their knowledge too seriously.
4 Wear your best for your execution and stand dignified. Your last recourse against randomness is how you act — if you can’t control outcomes, you can control the elegance of your behaviour. You will always have the last word.
5 Don’t disturb complicated systems that have been around for a very long time. We don’t understand their logic. Don’t pollute the planet. Leave it the way we found it, regardless of scientific ‘evidence’.
6 Learn to fail with pride — and do so fast and cleanly. Maximise trial and error — by mastering the error part.
7 Avoid losers. If you hear someone use the words ‘impossible’, ‘never’, ‘too difficult’ too often, drop him or her from your social network. Never take ‘no’ for an answer (conversely, take most ‘yeses’ as ‘most probably’).
8 Don’t read newspapers for the news (just for the gossip and, of course, profiles of authors). The best filter to know if the news matters is if you hear it in cafes, restaurants… or (again) parties.
9 Hard work will get you a professorship or a BMW. You need both work and luck for a Booker, a Nobel or a private jet.
10 Answer e-mails from junior people before more senior ones. Junior people have further to go and tend to remember who slighted them.
What should you take from this post? Well, his rules make a great deal of sense, for a start. And when you run your own business, you cannot afford to let the pronouncements of politicians and bankers sway you from your path. They are average people in high paying jobs trying to justify their inflated salaries by predicting the economic weather. Even the weather forecast is often wrong.
Plough your own furrow, react to reality, feedback from your customers and focus on your profitability to keep your business healthy, regardless of what your competition is doing.
If you enjoyed Taleb’s interview in the Times, his website is a little tougher to decypher! His book, The Black Swan: The Impact of the Highly Improbable is likely to be a fascinating read but not altogether practical to apply in the world of small business. Although I think he might disagree with me based on his general approach!