I am not sure if that is the right term or not, but I have been consumed with the idea that a nation of private real estate investors and the potential of their collective borrowing power. I think we rely too heavily on commercially available financing for the majority of our entrepreneurial needs. The system that is in place has worked for the first 200 years of our country, but I think that too much has changed to keep using outdated economic systems.
Before I go any further, I want to be clear that I don’t have the answer, but I do think that it is worth pondering. So much has changed since the 70s and the digital age in almost every aspect that it seems like we were doomed to collapse financially, whether it was real estate or some other industry imploding. Rather than look at real estate and mortgages as the cause of the collapse, look at it as the effect of another greater cause. Don’t be quick to jump to the usual assumptions about the market…that would be too easy. We have all read about the recent woes of many companies and processes that have broken down and have contributed to the fall of the industry…Let’s go up another 10,000 feet to see if we can see any other notable trends. It is a thought exercise and I am not going to entertain that thought here, but just consider where we have been in the last 200 years and where we are now. Much of what we do from a financial standpoint is still steadfast in old-world ways. I think that the whole system needs to be revamped from scratch, starting with the definition of capitalism.
This is going to take many great thinkers and modelers of economic paradigms, and would be excited to see what kind of results would be generated by this kind of a think tank, but for the moment it is not going to happen. I do think that one aspect of future lending and economic growth lies in Micro Lending…I don’t know enough about the banking system to tell you the pros and cons of how that might work, but I can tell you that there are individuals and companies large and small that are lending hard money to get deals done. In some cases, those are the only deals getting done. And that money is out there in spades if you know where to look.
I know that there are systems out there that are working, that could be employed or modified to encourage and support continued economic growth. On the other hand, we, as a nation, need to take a deep breath and re-evaluate our systems and recover from the mess that we are in right now. There are no quick fixes. I think that we need to have a very healthy debrief on what the hell just happened. I know there are many pundits out there who know exactly what happened and they have the fix for it all…I am not buying it, nor am I in any rush to make any determinations as to how we should get out of this flux. If mistakes precede progress, and it has proven that it does, then we are in for one hell of an upside when we learn our lessons and apply them intelligently.
By the way, I am not telling anyone that all of our systems are broke. I think that there is a lot of good and many good systems in place. I just think that we need to take a holistic approach and look at the problem as completely connected, versus, one or two key ingredients gone bad. I suspect that the problem has to do with our “thinking” and our “habits” as much as anything else. This presents its own set of problems because these are not easily undone, even if we understand at an academic level, what the problems are.
Many problems can be understood academically, but at the emotional level it is much harder to deal with and undo. Now consider that we have the emotions of a nation to deal with and you can begin to understand the scope of what really needs to be addressed. There is not a doubt in my mind that we can employ the brightest minds (and I hope we do) to create a new economic model, a newer, more updated version of capitalism that woks. However, until we are able to educate and excite a nation, then all is for naught.
And you know, education is really a big part of it. Not primary or secondary education, but the lack of financial literacy in general. One of the problems is that institutional learning is so far removed from the reality of daily living and real businesses, that it can’t provide an adequate education to entrepreneurs or business leaders. The mere attempt by a learning institution to create a financial literacy curriculum is an exercise in futility. The attempt is noble, but the exercise is futile.
This is going to have to come from the private sector and it will have to be simple…As I write this, I keep envisioning a financial Declaration of Independence, Constitution and Bill of Rights. Something so new and profound that has been designed from the ground up that sets the new standards for financial literacy…That is the scope and scale that I have envisioned. So much is broken that it might make more sense to start from scratch. The problem with that is it creates a new model…new models create fear…fear creates uncertainty and the masses are not comfortable with uncertainty…INDEED!
In my humble opinion there is another problem that is going to be incredible hard to address. We are not only financially ignorant, we are also “self ignorant.” It takes too much time and energy for us to admit that we are a part of the problem, but make no mistake about it…we are. We have forgotten that the greatest subject we can study is ourselves…Know thyself has become a phrase rarely uttered and even less heeded to. We have to know ourselves or at least make an attempt to understand our psyche because it plays into our understanding of money. We are emotional creatures and the majority of our decisions are emotionally based decisions. We can’t expect to understand our actions if we don’t make time to study ourselves. The problem is that the gratification is delayed in studying ourselves. It is not an easy subject and is often fraught with deep psychological scars that we would prefer not to deal with if we even acknowledge them in the first place.
The trend in almost every aspect of our lives is pointing to quicker and quicker gratification so this is going to be a hard trend to reverse. It can be done, but it isn’t going to happen overnight.
These are my thoughts and this is the process that I am going through to understand this turmoil and trying to come to terms with how it has affected my life.
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