If this is the "new normal" economy, what are opportunities for entrepreneurs?

[I D Shukhov]

Question posed to Mohamed El-Erian, CEO and co-chief investment officer of Pimco:

Q: So what is the New Normal?

A: The basic premise is that we are in the midst of a major national and global realignment. The main catalyst was the financial crisis of 2008, but the underlying factors have been there for a while. The question is: What does the world look like post-realignment? The world is on a bumpy journey to a new destination and the New Normal.

http://www.usatoday.com/money/companies/management/advice/2010-08-15-advice-el-erian_N.htm

Supposing we have stagnation and continued (or worsening) unemployment, would there be any opportunities?  Of course I'm not suggesting that one trade on people's misery via various scams or peddling vices, but something positive.

I'm thinking of Henry J. Kaiser's quote:  "Problems are only opportunities in work clothes."

The thing that comes to mind is an economy of scale strategy that could be facilitated by web-based management.  E.g. food co-ops, joint ownership of expensive capital equipment like cars, self-management training to enable worker-owned businesses --  mostly small-scale socialism, certainly not state socialism.   

Would it be worthwhile to look at who made money (ethically)  during the Great Depression?

[The Original Henry]

I've heard that 1990's Japan is the better comparison - what's been called the "lost decade". Basically the Japanese economy stripped its gears and it took them a long time to get traction again. Very similar dynamics to what we've had here, although the fundamentals of the Japanese economy back then were a bit different than ours now.

I have no idea what that means for the future. It's such a complex issue that I can't even conjure up a guess.

[TechTalk]

Of course I'm not suggesting that one trade on people's misery via various scams or peddling vices, but something positive.

Hasn't the dominant form of getting rich in this country always been to either scam someone or to take advantage of their pain?  In some ways, the H-1B/L-1 visa workers can be compared to the mid 1800s when Chinese labor was brought into the country to help build the railroads throughout the Western United States.

Supposing we have stagnation and continued (or worsening) unemployment, would there be any opportunities?

Like The Original Henry mentioned, some people say we are going to go through a period of deflation similar to what Japan has experienced for the last 15-20 years.  Personally, if things keep going the way they are now in this country, I see rioting within 5-7 years.  I know this sounds crazy because all you have to do is:
* Turn on the TV set and you will see plenty of fans attending sporting events.
* Drive around town and you will see the parking lots of box stores full of cars.

However, if you look at things from a different perspective (i.e. chronic long-term unemployment, government debt, and private debt) then things look totally different. 

Most people seem to blame the banks and mortgage companies for the mess that we are in today.  Imo, what these companies did was speed up the inevitable.  The number one issue facing this country is what is the government going to do about all of the manufacturing and service jobs that have left this country, as well as, the ones that are in the process of leaving this country.

The thing that comes to mind is an economy of scale strategy that could be facilitated by web-based management....

Hmmm... Are you asking how you can get involved (and prosper from) in something that you see as inevitable?

[I D Shukhov]

Most people seem to blame the banks and mortgage companies for the mess that we are in today.  Imo, what these companies did was speed up the inevitable.  The number one issue facing this country is what is the government going to do about all of the manufacturing and service jobs that have left this country, as well as, the ones that are in the process of leaving this country.

That's what  Mohamed El-Erian said: 

The main catalyst was the financial crisis of 2008, but the underlying factors have been there for a while.

Right, the "underlying factors" are jobs, our trade deficit, crummy education system, political gridlock (that reflects an underlying cultural schism) -- I could probably go on, but that's enough.

Hmmm... Are you asking how you can get involved (and prosper from) in something that you see as inevitable?

Yes, in the sense that  "Problems are only opportunities in work clothes."

[JavaMouse]

Most people seem to blame the banks and mortgage companies for the mess that we are in today.  Imo, what these companies did was speed up the inevitable.  The number one issue facing this country is what is the government going to do about all of the manufacturing and service jobs that have left this country, as well as, the ones that are in the process of leaving this country.

I agree with you, the problem is globalization (good analogy with the mid 1800s - it's the same today with the illegal aliens coming in from south of the border).  It would not be such a problem if it were done slowly enough, over the course of a few generations.  However, it's happening so fast that our way of life is being thrown under the bus with no time to adjust.

It used to be you'd get a degree and go do that thing for the next 40 years.  Now, you can train 4-8 years in school, and the resulting degree is only valuable for a few years.  Why bother?  Further, people see extremely wealthy people get golden parachutes for destroying a company and sending jobs overseas.  They wonder why they should work hard; it's demoralizing.

Also, I think the national debt is a huge problem. I am sure the intent is to inflate it away, but we are paying so much money in interest on it, what a waste. I'd rather have that money staying in my pocket, or at least going to social programs.

[JavaMouse]

Would it be worthwhile to look at who made money (ethically)  during the Great Depression?

Yes, I think it would be; at the least it might help you generate ideas.

Here's something, question about "Successful companies and industries during the Great Depression":
http://answers.google.com/answers/threadview/id/178334.html

Google the question "Who made money during the Great Depression":
http://www.google.com/#hl=en&source=hp&q=who+made+money+during+the+great+depression&fp=1&cad=b

I'd like to see a full book about this.

[I D Shukhov]

Both articles claim the following is true (excerpted from the first article).

To state a generality, those companies who not only survived but did
well and grew during the Great Depression are those who continued to
act as though there were nothing wrong and that the public had money
to spend.  In other words, they advertised

In other words, basic human needs didn't change, and the successful companies continued to reach out to their customer base. 

[David Randolph]

Actually, there are significant differences between "acting as if people had money" and what happened in the Great Depression. It is important to realize that many people did have money at that time and had the willingness to spend it. But, companies had to give people a reason to spend it. Thus, if you look at automobile companies, they innovated like crazy at that time. New products and great design still sold.

Luxury products sold during the depression. People with great wealth did spend it. However, spending on "labor saving devices" was difficult to justify as people could be hired for less and less. Thus, while IBM was busy designing new products, they didn't sell well until the government came in and bought huge numbers.

For us, remember that what software does is to replace people in the economic equation. Thus, when people are at a discount, it is harder to justify spending money on software development.

[Richardk]

Thus, when people are at a discount, it is harder to justify spending money on software development.

That's where I was going. The one holding the money will ask "do you really need it?"

People are great at finding solutions, just look at how many things Excel is used for. If that combination works then it's harder to justify replacing it.

There is no doubt people are still spending but I've seen many different "crafts" go under. When "good enough" becomes the norm, it's difficult to stay in business for the few that recognize / appreciate your skill / craft. Some limp along but see a diminishing market while others close up because low quality but cheap alternatives exist.

Right now labor is relatively cheap and if you can get them to work "professional days" or simply off the clock then the employer is getting a huge benefit for free.

[David Randolph]

There is one reason to spend on replacing people: government regulations on employers.

For example, there are new regulations that hit when a company gets to more than 50 employees. Thus, there is an opportunity to have a different corporate structure so that the top corporation never has more than 49 employees. All the rest are employees of contracted companies. I predict that "outsourcing" people will take off.

[I D Shukhov]

For us, remember that what software does is to replace people in the economic equation. Thus, when people are at a discount, it is harder to justify spending money on software development

I can think of the following counterargument:

Companies like the idea of replacing people.  It's just a lot cleaner:  no messy personnel problems and health insurance costs.  Reducing head count is why corporate profits are doing fine right now -- about the same as before the financial collapse.  If the staff they have left are a bit overworked, why not ease up on the load with some more automation, reach a new equilibrium, and lay off some more people?