Do You Know Where the New Economy Is?

How should the average remodeler react to the turn in the new economy? This column provides some thoughts about how to react to the changing demands of the new economy.

February 28, 2001

In recent months, we’ve all read about the dot-com carnage. Since the middle of last year, many Internet companies have watched their stock prices plummet and seen the task of securing funding go from easy to impossible. We’ve also read about companies having to abruptly lay off the staffs they had previously spent millions to recruit, or being forced to change business strategies faster than Madonna changes hairstyles.

So what does it all mean? How should the average remodeler react? Should you invest in new technology? Should you hold or sell those Internet stocks? This column provides some thoughts about how to react to the changing demands of the new economy.

Thought No. 1: Technology still matters. Way back in the early days of the Internet, say three to four years ago, many entrepreneurs believed we were witnessing profound changes that would affect the way we work, play, communicate and live. I still believe this. The new economy has brought enormous change, and ultimately it should lead to higher productivity, which should mean a higher standard of living for all of us. It’s still the case that we are witnessing a time of change so sweeping and thorough that its magnitude can only be compared to the time of invention of the railroad, the telegraph and the television. Think of all the inventions new or recently new to our lives —the personal data assistant (PDA), the notebook computer, high-speed Internet access, the ATM. It’s a long and important list, and it should only get longer in the years ahead.

Something has changed though, which brings us to the second thought: The pace of development has slowed. Two or three years ago, it looked like these changes were going to happen overnight. But companies with less money to spend in today’s economy seem more cautious in making investments in new markets and new products, so the pace of the Internet revolution has slowed to an Internet evolution. Still fast, but not overnight. This means that what we originally thought would take place overnight may in reality take a few years.

My third opinion can help us keep perspective in the midst of all this gear changing: Don’t worry. It’s not that bad. Like the length of women’s skirts or the popularity of disco music, our stock markets are a victim of fashion. From 1997 to1999, consumers in the public markets bid up the prices of profitless startups higher than they should have gone, and money from venture capital firms funded companies whose business plans should not have progressed beyond an MBA class. Today, the market is moving in the opposite direction and in some cases over-punishing the same stocks. But it’s important to keep common sense and fundamentals in mind as you watch today’s markets.

So what’s a remodeler to do? I often get asked for advice on how to act in these uncertain times—and my watchword is "steadiness." This helps in a number of ways. If you’re thinking about whether to buy or sell that tech stock, my advice is to use your head and think long term. If you’re holding a stock that has no long-term viable business model that provides profits (not revenues), then you may be holding a dog. On the other hand, if the company generates cash earnings for investors and convenience or cost savings for consumers, then it’s probably a good business and the market should eventually agree.

Another place to remain steady is in your own investment in new technologies, communications and high-tech learning. Prices continue to fall for hardware, such as computers and personal data assistants (PDA); for communications, such as high-speed Internet access and cell phone time; and for online advertising. Have you purchased a PDA? Have you explored getting DSL or a cable modem for your business? Are you communicating with customers via e-mail? All of these are technologies you should understand and be thinking about. Don’t let the current market jitters knock you off the path of learning and experimentation regarding technology.

A third place to keep steady is in your devotion to what’s important. At the end of the day, what matters is not the economy or the technology. It’s how you select and treat your customers, your employees, your shareholders, your families and yourself. The technology and the economy are background for the main event of your business’ fair prices, straight and true workmanship, and attention to detail. Remain steady to those who matter most to you, and all of today’s economic changes should stay in perspective.

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