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October 1, 2007 by Gary North, Ph.D.
A recession can set back your career plans by five years, maybe ten. If you get fired, at least ten. Your personal cost of not taking evasive action now, while you still can do this cheaply, could become a major setback in your long-term plans and expectations. You won't make up ten years inexpensively. We are heading into a recession, or something grimly close to it. Your company's clients will start looking for things to cut out of their monthly budgets. Maybe you are insulated from cost-cutting measures, but don't count on it. You may not be the boss. You may be an employee. But your company may not be able to insulate you from free market forces. We see this continually these days. It's easy to coast. It's also a lot more risky than it appears. As the queen said to Alice in Wonderland, you have to run fast just to stay in place. Most people prefer to coast. Doing what comes naturally after years of doing anything is easy. But there are newcomers who have never done things your way, and who are anxious to replace you in the hearts and minds of your clients or your company's clients. THE UAW AND GENERAL MOTORS Consider the United Auto Workers. The UAW settled with General Motors after a two-day strike, the first strike since 1970. It gave up far more than it got. The number of GM's UAW employees is 73,000. A decade ago, it was 225,000. It is clear that the UAW is doomed. So is the future of General Motors. But nobody says publicly that "GM is terminal." It would be bad form. It would be impolite. But it has that look to it. Japanese auto makers have built plants in Tennessee and other greenbelt states. These states have right-to-work laws. Unions have no clout. This is where the future is for auto production inside the United States. This has been clear for at least 20 years, but GM's unionized employees did not see it. They went to work, paid their union dues, benefited from above-market wages enforced by the National Labor Relations Board, and thought they were covered for life. One by one, most of them got laid off. They were not replaced. Now it is Ford's turn -- Ford, which has hocked everything it owns. It will then be Chrysler's turn -- sold by Daimler as a losing proposition. This was always the UAW's strategy: strike against one company, get a settlement, and then force the other five, then four, then three to settle. It doesn't work any more. They can get the Detroit iron firms to capitulate on minor matters, but they cannot budge the Japanese firms, who produce the cars that more and more Americans want to buy. This is the fate of every industry that today relies on government intervention to keep prices high, wages high, and competition out. The globalization of production is putting too much price pressure on above-market, government-protected industries. One by one, they are bleeding. The services that are performed in these controlled markets can be sold from abroad: imported goods, Internet services, and telephone services. As the price of digits falls, the cost of production falls. The old, secure mountains of economic privilege and protection are being scaled by price-competitive, unregulated producers. Yet the UAW's members still cannot see this. Neither can CPA's and other service-suppliers whose talents are not superior to some 25-year-old kid in India, who will work for $15 an hour. The best and the brightest 20% in every field will be able to command top wages. The bottom 80% are becoming commodities in an increasingly competitive world market. COL. SANDERS WAS CHICKEN Harland Sanders started his chicken business in a gas station in 1930, long before city health officials had any clout in Corbin, Kentucky. Nobody died from eating his chicken. In 1936, he expanded by buying the motel across the street. The business was successful locally. He served travelers who passed through. He could seat 142 people. In 1955, he learned that Highway 75 would bypass Corbin. He sold his properties. If he had sold earlier, when the plans were first announced, he would have received a better price, but he waited until he got his first Social Security check: $105. He was afraid to sell before this. Sanders took the money and went on the road to sell chicken dinner franchises. The result was a fast-food empire. His second career made him a multimillionaire. He was pressured by circumstances to branch out. Most people don't. When I first visited Fayetteville, Arkansas, I had to drive a winding road 45 miles from Highway 40 to Fayetteville. It was a killer. There was one area where eight people had died over the years. In 1999, a new highway opened. I never drove the entire "scenic route" again. I doubt that anyone else did, unless he was delivering goods to the small towns along the way. The retail restaurants and other shops that had been successful for years lost most of their business overnight. Decades ago, I read a short story by the Canadian humorist Stephen Leacock. It was the story of a bartender in the months before Prohibition was scheduled to be enforced in his province. It was set sometime around 1910. The bartender did his work, just as he always had. He chatted with customers about what he might do after the doors closed. He might go into farming. Something. It was all vague. He stayed until the last day. Then the doors closed. The End. It was not a funny story. I have thought about that story ever since. That bartender refused to see the handwriting on the wall. He did not hear the clock ticking. He thought something would turn up. Nothing did. He took no action, as if there was some way that he would not lose his job and his career. He stayed until the end. He was not bitter, but the end was. I think he is typical of most people. They become paralyzed at bad news. They see what is coming, yet they do not take evasive action. They act as though what they know is coming will not arrive. People think, "It won't happen to me." It will. They think, "I can find a way around this." Col. Sanders did at age 65. Most people won't. This missing factors are perception, initiative, and courage. PERCEPTION Sanders saw what the new highway would do to his business, which depended on repeat visits by drive-through travelers. They would no longer drive through. He responded rationally to a threat to his income. He decided to start a new career at age 65. He was unique in all respects: perception, initiative, and courage. People generally see only what they want to see. Their perception is governed by their unwillingness to accept bad news. They prefer good news. They have a commitment to good news. This affects their ability to assimilate bad news. They can't react to it in a timely manner. Think of your situation. Is there likely to be a reduction in future demand for what you sell? Maybe this threat is industry-wide. Maybe it's just your company. If it's industry-wide, this cuts off your most obvious escape hatches. Have you gone onto the Web to search for topics related to your field? Are you a subscriber to a trade magazine in your field? Do you monitor the Help Wanted section? Do you know what the prevailing wage is for someone with your background? Are there regions where demand is higher? Are there subcategories in your industry that seem to be insulated from the business cycle? Today, that is a major advantage -- an advantage that is not widely perceived yet as an advantage. The window of opportunity remains open. Can you spot any niches within your industry that are beneficiaries of required purchases? If a company would have to shut down if it did not buy the kinds of services you sell, you want to be in that company's existing supplier base today. It is always a hassle to switch suppliers. There are always unforeseen glitches in making a switch. This is why companies continue to buy from suppliers who may not be the least expensive. Do you work for a firm that is established as a supplier for companies that are likely to weather the economic slowdown that is coming? Have you bothered to find out who your company sells to? Have you any idea why the existing clients are unlikely to switch to a competitor? Don't assume that your boss is looking at this carefully today. People like to think they are immune from free market forces. They like to think their customers are loyal. No company should assume this. Every company should find out. Perception of safety is not the same as safety. INITIATIVE Would you say that you are a person with initiative? If so, what evidence do you have for your assessment? 1. Have you learned a new software program in the last year? 2. Have you proposed to your boss a new service to offer to clients? 3. Have you shopped the job market for people with your skills? 4. Have you looked to see if a different region pays more for people with your skills? 5. Have you checked to see if there are niche markets that offer you more opportunity? 6. Have you updated your resume in the last year? 7. Have you started a time-management system that lets you spot "free" time? 8. Have you evaluated this schedule to consider the possibility of starting a side business? 9. Have you developed an exit strategy, just in case you get fired? 10. Have you discussed with your wife the possibility of making a career change? Any of these is characteristic of someone who shows a lot of initiative. The more of them that apply to you, the more initiative you show. The heart of the matter is your willingness to adjust your plans to perceived changes in your environment. This could be a geographical environment (living costs). It could be a family environment (the word "divorce" comes to mind). It could be a job environment ("You're fired!"). It could be an entire career environment (mid-life crisis/re-evaluation). I suppose the heart of the matter is the question: "What do I really want to do with the years I probably have remaining?" The earlier you ask this, the better. I asked it at age 18. I am still working ten to twenty hours a week, unpaid, on the answer I came up with. COURAGE It is not enough to perceive a looming problem. It is not enough to develop an exit strategy. To make the first two steps meaningful, you must have the courage of your convictions. Otherwise, after the expected event arrives, and the opportunity to take evasive action is more costly, you will sit on the sidelines and say, "I knew! I knew!" That tends to produce responses that you would have regarded as self-destructive six months earlier. Courage is basically the willingness to take action after you have counted the costs, and have decided that the cost of doing nothing new is too high. It means acting consistently with your conclusions. The problem is, our desire to sit tight is a cost to be overcome. This may be the highest cost on your list. Transaction costs are often quite high: selling, moving, and buying. But if the cost of doing things in new ways is your biggest barrier to both entry and exit, then you are a bigger problem than external events. You are your own worst enemy. My daughter quit her job recently. She starts a new job on Monday. She left an industry that is in transition: the music industry. She left her old job in the week that Amazon announced its price-cutting plans for MP3's, which has sent the music industry into another tailspin. She had been planning her exit strategy for months. She did what it took to make the transition. Her new position will pay more, be far less at risk from a recession, and offers her more authority to make decisions. It was an upward move. She made her escape before she was fired. She had two offers to choose from. When you get fired, you're on a short time leash. You tend to take the first offer you get. This is a career setback in most cases. She had a plan. She executed her plan. She will not become the victim of her previous employer's absence of a plan. Her previous employer has not replaced her. The company is biding its corporate time to see what happens. It is in paralysis mode. It was wise for her to abandon ship when she could leave on her terms. CONCLUSION Sitting tight on a ship that is heading for an iceberg is unwise. Yet people do this. Even after they have heard the crunch of the impact, they sit tight for someone to tell them what to do. Nobody cries, "Abandon ship!" until the ship is visibly sinking. There are never enough lifeboats. Paralysis is not the only threat to careers. People who jump ship too often may develop bad habits. But in today's world of shifting consumer tastes, growing Asian competition, and Federal Reserve uncertainty, paralysis is probably the greater threat. It is surely the greater temptation. What do you really want to do with the rest of your life? I advise you to sit down this weekend and consider the best avenue to that end. It may not be the avenue you're presently cruising down.
Dr. Gary North earned a Ph.D. in history and is one of America's keenest economic analysts and commentators. He supports the Austrian school of economics and is a previous assistant to libertarian congressman Dr. Ron Paul. Visit his website at http://garynorth.com. To subscribe to Gary North's Reality Check go to http://www.dailyreckoning.com/sub/GetReality.cfm. If you enjoyed this essay and would like to read more of Gary's writing please visit his website at http://www.garynorth.com or http://www.freebooks.com.
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