What to expect

We are facing a severe recession, maybe a depression.
Creative destruction.
The economy will eventually reallocate capital and labor.
To many projects have been started, that should not have, they will have to be liquidated.
The assets will be much less worth in liquidation.
Someone has to take these losses.

The recession is a contraction of the economy.
Contraction away or back from the peak of the business cycle.
More back to earth.
Less fancy.
Less “sophisticated”.
Less division of labor.
More towards a point back in time.
To arrive at a lower point.
A point of less economic acctivity.
From were the economy can be rebuilt, slightly differently.

The economy will have to grow with capital realocated.
Less capital will go into finance.
Less capital will go into real estate.
More capital will go into the public sector.

There are way to many real estate brokers – what will they do next?
There are way to many people in finance – what will they do next?

It seems evident that this event will change things forever.
Peoples financial dreams and hopes are scattered.
People will look for new things.

Expect a new “green wave” in America where people live green and cheaply.
Grow they own food, use less resurces.
Focus less on money, more on community.
Less on things, more on services.

Expect the internet to provide the base for new community building.
“Does anyone have an electric drill?”
Stronger communities.
Urban communities.
Communities of people who find new common ground.
“Let’s help each other communities.”
Formalized communities.
Communities that create real wealth and quality of life improvements.
Expect service barter micro economies to arrive.

Family.
Church.
Health.
Green.

People have been praying to the god of finance and forgotten each other.
People have been led to believe they could replace a place in the community with financial power.
To pay their way and ask people to shut up or put up.

Expect people to lose confidence in money.
Expect people to lose confidence in government.
Expect a big big big dissapointment dissillusionment movement against Obama in 6-12 months.
Expect money to become less important.
Expect career to become less important.

Where will the next growth come from?
Government expansion is a given.
Government services.
Government bureaucracy.
Government war.
Government takeovers of industries.
Goverment stimulus pacages.
Green technology.
Green transportation.
Green insulation.
Green food.
The continued rise of Asia, phase 2-3-4-5 and so on.
Perhaps Africa or the Middle East – though I doubt it very much.
Community enabled things.
Mobile / community enabled services.

New, more narrow division of labor from community matchmaking of needs and wants.

Expect higher taxes.
Expect more protectionism.

Expect tens of thousands of new small green farms – what do they need?
Expect the rise of a repair industry, to fix old stuff rather than throw away – what do they need?
Expect massive rise in the use of the internet as people have more spare time, and look more for advice.
Expect massive rise in the use of internet video for self help and “how to” fix stuff etc.
Who will start the “Airconditioner repair tips” – blog?
Who will build the online communities?

Expect less motor traffic.
Expect less polution.
Expect more public transportation.
Expect people to have more spare time. What will they do in their spare time?
Expect crime to rise – what do people need to protect themselves?
Expect fear to rise.
Expect the amount of stuff on eBay to boom, buy anything cheap in 12-24 months.
Expect government jobs to be back in vouge – as safe.
Expect to be asked for help by friends and relatives.
Expect to be asked to lend money from friends and relatives.

Expect capital resources, trucks, building machines etc to stand vacant everywhere.
Expect last minue travel to be dirt cheap for a long time, wait and see.
Expect a lot of “deals” to arrive.
Expect massive bankruptsies.
Expect massive sales from stores that go bankrupt.

Expect smaller, humbler cars to arrive.
Expect the huge SUV to be out of vouge.
Expect people to become more humble.
Expect some people to appear less confident, more humble, more soft.
Expect some people to harden down, to be more aggressive.

Expect the rise in sale of cheaper alternatives.
Expect a rise in the sale of scooters.
Greyhound Busses will do relatively well.
IKEA will do relatively well.
WallMart will do realtively well.
Wholesale prices vendors will do relatively well.
Internet based “lowest cost” sellers will do relatively well.
Cross border shopping for lower taxes etc will do well.
Tax free will do relatively well.

Ask yourself “Is there a cheaper way?”.
Everyone else will be asking the same thing, if you can – provide the cheaper way.
Everything can be done cheaper – everything.

Can it be cut altogether?
Can it be done by someone else?
Can it be done by someone in India for a fraction of the cost?
Can it be done online on the internet?
Can the customers do it themselves?
Can you provide a tool online for the customers to help each other?
Can you buy the service cheaper from someone else?
Can you leave someone else with the trouble?
Can you deliver the goods or serivces will less costly service?
Can you merge or align your efforts with others for more efficiency?
Can you buy something from someone distressed that will save you money?

Downtown luxury stores will do very poorly.

A softening and a hardening at the same time.
Some people going soft.
Some people hardening down.
I see a conflict between the two.

The softening will turn to soft values.
Things that were neglected in the boom.
Reading.
History clubs.
Genealogy.
Health.
Green stuff.
Play with the kids.
Family gatherings.
Community.

The hardening will turn to defensive mode.
Aggression against Liberals, Democrats, Obama.
They will blame everything on the liberals.
They will buy guns.
They will build walls.
They will enclose themselves in communities.
They will buy material to reinforce their hardened stance.
They will become more “patriotic”.
Church.
Marriage.
Military.
Local government.
Conservative classical values.
Community.

People will focus on their own immediate needs:
Expect less focus on foreign aid.
Expect less focus on the environment.
Expect less focus on personal privacy issues.
Expect less focus on open internet.

Expect the people and organizations that do have money to gain power.
Cash is king and the world will dance to their tune.

Expect Google, Microsoft, Berkshire to be able to buy a lot with it’s cash.
Microsoft will aim for something big to gain back lost ground from Yahoo – expect something unexpected, perhaps in telecom or media?

Expect more losses for yourself, even if you have protected yourself well.
Losses are most likely unavoidable.
The world will be less nice, unfortunately.

On the internet.
Advertising will go down, print and online.
A lot of the current advertising is still very untargeted, shotgun approach.
Anyone who can do more targeted advertising is on to something, rifle approach.
Advice blogs will go up.
People will be less “sold to” and much more “this is the cheapest” told.
A pure and raw low cost strategy is the best online as the customers will find the cheapest themselves and do the marketing for you.
Auction sites will prosper.
Networking sites will prosper.
Transaction enablers will prosper – Craigslist etc. will boom.

Devices to access the wealth of free information online will continue to boom.
Sales of iPhones, Blackberries, small laptops, personal communicators etc will continue to do well.
The investment for a person on this is so high return, it makes sense.
There will be a second hand market for these devices that is not here today.
There will be a market for device and laptop spare parts and repairs.

Services that target and enable these mobile devices will prosper.
Coordination of physical events.
Community building based on the unique features of the devices.
Transaction enablers based on unique features of the devices.
Amassing of critical masses of people to make sense to do stuff.
What can you create a critical masses for? Spontanious concerts? Shock sales?

It seems to me that the new growth of a post recession/depression economy must come from utilising new technology in internet and mobile devices and community building. Building value through new forms of transactions that were previously not possible due to high transaction cost. Enabling the division of labor by creating new opportunities by connecting people that were previously unable to be in effective touch with each other.

Examples:
- A local marketplace for the growth, trade and barter exchange of locally grown ecological produce.
- A Craigslist like exchange for services that improves efficiency dramatically, cutting down lost and wasted time in the service industries from say 40% to 10%. “50% off on BMW paintjobs next week.”
- Study groups for more and more focused topics, who will join the “Converting my scooter to electric study group.”
- “Ok, I will start a shop for modern African art when I have 400 people pledge to spend at least USD 100 annually in the shop, I now have 83 pledges on Facebook Pledge – help spread the word and get us to 400″
- Efforts to improve present excisting capital structures into better use, both private and public.
- More and more narrow global groups to get together and make transactions.

We already see some of this happening in Craigslist, Facebook, eBay, Google, etc. But the potential is wastly larger than what we see today. This can be structured in a better way. If this can be structured into a well oiled machine, perhaps using the promising semantic web and new business models to enable transactions – then we are onto something.

This was a lot at the same time – it is my hope that some of this will trigger the right idea for what you should expect now.

Hans Lysglimt

Oslo, Norway. Oct 27. 2008.

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