Who Should We Believe?

When it comes to industry economists, who should you believe?  Dr. Joe Webb, is normally considered the most pessimistic and Dr. Ron Davis is considered by many to be an optimist.  And then there’s NAPL’s Andy Paparozzi, who is probably considered a ‘tweener.

So, as a business owner/manager whose numbers should you believe?

First, let me tell you an “old” joke.  It’s about the business owner who decides to change CPA’s.  After narrowing it down to three firms, he personally interviews each principal.  The first candidate talks about his pedigree and the experience he’s had working with the big national and regional firms, as well as his magna cum laude degree earned from a prestigious B-school.  The second candidate talks about her experience with small businesses, especially businesses similar to the owner’s.  She also talks about the many times she’s been able to deal with the IRS and save owners tax dollars.  The final candidate doesn’t talk too much about his schools or past experience, but just leans over on the desk and says, “What would you like the numbers to be?”

And maybe that’s my punch line.  Each of our industry’s economists is looking in rear-view mirrors with different economic models.  Each one believing it’s the best predictor.  Given the makeup of our industry, it’s regionalization, and its fragmentation, trying to measure economic results, or to predict them is similar to forecasting weather in Kansas and Oklahoma during the spring.  You can predict overall trends, but you are not going to be able to predict how many tornados are going to hit in Harper County Kansas.  Unless you are Quebecor, Cenveo or RR Donnelley, the industry economic numbers are not very relavent. 

And this is why we are now conducting regional surveys with our MidAmerica members and why participation is so important.  Yes, it’s is still looking in the rear view mirror, but at least these numbers will help gauge the local temperature.

And what’s going to happen in the economic future?  Well, here’s where I’ll quote Dr. Doom (Joe Webb), “Many economists are raising their GDP forecasts for the third and fourth quarter (’09) and for 2010. Let me understand this: We’re asking the economists who did not see the bubble, the bursting of the bubble, and the length and depth of the recession for their forecasts for 90, 180, and 450 days from now. Okay, I’ll play along… but only if I can bring my own dartboard and blindfold, too. All businesspeople need to know is that it will be slow, and any upturn will be mild, and that there is real risk of inflation. Treat your customers well, look for ways to lower their costs, open new opportunities, and select suppliers who help you do the same. Worrying about a half point change in GDP takes your eye off your customer’s needs.”


One thought on “Who Should We Believe?

  1. Greetings from Rhode Island and WhatTheyThink!

    Just thought I would add a few comments. First, I am not a trained or professional economist, and with that other economists strongly agree. 🙂 I try to write from the perspective of someone who has to look out three, five, ten, and more years out… of someone who wants to be in business at those times, who has to navigate economic conditions that are ahead. Businesspeople don’t have the luxury of being in business only in good days, we are in business all of the time.

    There were some interesting data a few weeks ago that the business startup failure rates are the same in recessions and in boom times. It underlines that entrepreneurs work with what conditions are at the time, and not the conditions that they want.

    As far as the joke about “what do you want the numbers to be” I think each statistical profession has that. I have the market research version where each VP is called into the office by a new CEO, who asks each of them “what does 2 + 2 equal?” The VP of finance says 2+2=2.8 because they have some loss carryforwards and some tax credits and a change in depreciation. The VP of sales says 2+2=6, maybe even =7 if they get some cooperation from manufacturing and the credit department. The VP of manufacturing says that 2+2=3.999999, and it might be equal to 4, but unless they got their new testing equipment, they could not measure it as precisely as they wanted. Then the VP of market research is asked the question, walks slowly to the side of the CEO and whispers in the ear, “what do you want it to be?” The joke was told to me years ago by Neil Richards of Kodak, now retired for about 10 years. Thanks for the accounting version… I had never heard that particular one.

    Regarding the question “So, as a business owner/manager whose numbers should you believe?” it is a really critical one. I advise business owners that they need to believe their numbers first, but even their numbers can lie to them. I think it is really important that companies inflation-adjust their own company data to have correct views of past data. It’s amazing what the difference can be and the things that can be found out in that process.

    Also, there is a tendency of business owners to look at national economic data as being meaningful to their business. Those numbers are not. They’re business owners and they have to keep reminding themselves that they should aspire to be entrepreneurs, and it’s their job to defy the economics. Who wants to grow at the rate of the economy? That’s just an acceptance of mediocrity. We’re in business to find opportunities and create services for the benefit of others. Those kinds of acts are not in economic data, but in the creativity and insights that business owners need to have.

    Thanks for the mention! See you and others @ Print09!

    Dr Joe

    PS Feel free to download the PDF version of my book “Renewing the Printing Industry”
    manroland and Xerox will also be giving away hard copies at the show

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