*The Debatewise Blog
The wisdom of crowds
There’s been quite a bit of conversation about the role confidence plays in the economy. Many very smart people, Sir Philip Green and Andy Street – John Lewis’s MD – are the ones I can remember, have gone on record to say there’s no real problem with the economy other than that consumers perceive. If we were to think positive and start buying again, they say, we’d get ourselves out of this mess.I’ve got two problems with this thinking. Firstly, this is not an imagined threat. Our purchase power has come largely from home equity. We didn’t worry about going deeper into debt as long as house prices kept going up. Now they’ve started going down it is normal and natural to want to reign in our spending.
The second problem is that the correction downwards is essential. Britain, America and many other Western economies are mortgaged to the hilt. We’ve borrowed way too much and saved way too little. We’ve banked on the economy continuing to grow indefinitely and deep down we always knew that was ridiculous.
On some level all of us knew the good times had to end. Not because we’re pessimistic but because they always do, life is cyclical by nature. We’ve been ready to stop spending for some time. We’ve know this period is coming but have put it off for as long as we could – whilst at the same time gradually resigning ourselves to the inevitable.
All of which means this is not simply a confidence issue. Yes confidence plays its part, but we’ve been overconfident for a long while and if we’re underconfident now it’s just gravity taking the pendulum the other way.
The subtext of what’s being said here is that the hive mind is wrong, collective wisdom is wrong, we are wrong. And I have a fundamental problem with that. Partly because I believe in the wisdom of crowds and think if that’s where we are that’s where we are. And partly because the task of trying to change the hive mind is just about as impossible as it gets. Best thing is to try and find the positive.
We’re not ready to start spending yet and probably wont be for some time. And that’s a good thing. We need to clear out the deadwood, stop unnecessary spending, get rid of the shit we buy to make ourselves feel better and start focussing on what we really need.
This will not be an easy time. But life isn’t supposed to be easy, joy doesn’t come when things are easy, joy comes by overcoming hardship, by getting through the tough times, by overcoming obstacles and meeting challenges. What’s ahead will hurt. What’s ahead of that will be better as a result.