Learning from history

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The one thing that we learn from history is, well, we never learn anything from history. While this statement may be a logical anomaly, I will still try to explain what I mean.

Put simply, we trust our own experience too much, and don't see the patterns from the past, particularly if they date from before our birth. A great example is the housing market; smart investors were selling properties when people were still saying that house prices always go up. History indicated that house prices were at a historical high by any measure, but hey, everyone knew it was different this time.

History is littered with housing (and banking) busts, but what has that got to do with us? It's irritating to find that all of those highly paid bankers and economists couldn't learn the simple principle that the bigger the bubble, the bigger the crash. That lesson is totally consistent over hundreds of years.

In the last few years, we've had a great party, exporting our dirty, hard and low paid work to China and paying with IOUs from ourselves and the government, building up more debt than ever before. Now after the party comes the hangover. People are complaining that the only economic problem is the media talking down the economy. A long term look at economic data suggests that this is wishful thinking.

My advice would be to prepare your business for the worst and longest recession of our lifetimes. It's long term history that makes that suggestion, and like all 'we're doomed' prognostications is pretty unpopular. So I don't expect many people to believe it. Such is life.

Note to self: I must contact that successful serial entrepreneur who bet me an expensive lunch earlier this year that the US wouldn't go into recession. You see, there's a silver lining to even the darkest cloud.

Submitted by Chris Barling, CEO of ecommerce software supplier Actinic.


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