Earlier this month, in a blog post about things I no longer believe in (due to the current recession), I included “economic narratives” among them. In his book, The Black Swan, economist and author Nassim Nicholas Taleb describes the process one goes through of cherry-picking events or facts that neatly fit into an economic narrative that sounds completely plausible, but can be completely wrong.
We all do the “narrative thing,” so this post isn’t an indictment of the practice. Heck, this post and this blog (like all opinion-driven media) are exercises in cherry picking things that “confirm” what I observe and believe. (Fortunately, I’m old enough to know that my narrative can be based on a premise that is completely wrong — as discovering you can be wrong is one of those things that make youth less appealing than the hype suggests.) When we believe in something — be it that social media is the answer to all marketing challenges or that newspapers are going to be dead in a matter of months — our observation of the information stream flowing by us each day is sub-conciously filtered to help those things that back up our premise jump out at us.
It’s sorta like when you are thinking of buying a car (back when people did that) and you think you’ve chosen a model that not too many people drive. But as soon as you decide on that model, you see them everywhere you look.
Again, we all do it. It’s not only natural, it’s part of our DNA — but that’s a longer post.
Collectively, the news media of the mainstream variety move through such narratives. Since September 15, the narrative has clearly been that we are in the midst of “financial crisis.” According to the narrative, the crisis is more than a cyclical recession, it’s “the worst since the Great Depression.” To those “reporting” the economy, anything that supports the narrative is news, anything that challenges it is noise. Again, I’m in no way suggesting the narrative is wrong and I’m in no way suggesting the economy is not horrible, however, the determination of the historic ranking of our current economic woes will be up to historians years from now, and not up to those of us living through it.
While there are some who feel the need to have a narrative that has us never emerging from the current economic downturn, history is clearly on the side of those who believe that at some point, there is a bottom.
I believe one way to start sensing where the bottom is occurring is to look for reporters, analysts and anyone but those appearing on CNBC (turn the damn-thing off) to begin shifting the narrative.
Here are some things to look, read and listen for:
Recession winner stories: A new narrative includes stories that suggest the country may be going to hell on a Harley (I’m updating my “handcart” usage), but there are counter-cyclical beneficiaries of the downturn that are not doing so bad. Go-to stories: alcohol, Walmart, Bibles, candy, movies and any business that provides services related to homes and condos that can’t be sold.
Statistics stories without the caveat: During the past six months, any story that included even a glimmer of something positive would be edited to include a clause that went something like: Unemployment claims were less than expected last week, despite this being the worst economic downturn in the history of mankind. When editors start leaving out the “despite” clause, the narrative has shifted.
Stories about the role of psychology in economic cycles: For months, we have heard how the stock market crash and recession were caused by things that sounded rational, but because we’re mere humans, we can’t understand — highly technical and extremely complex, global financial factors that are way beyond our comprehension, you know, like derivatives and credit swaps. Now, get ready to hear how it’s “psychology” that is responsible. The new narrative will suggest that more than “credit swaps,” the “crash” was caused by our leaders scaring the beejeezes out of us and we all responded like people who have the beejeezes scared out of them should rationally respond — we started hiding in the basement instead of shopping. As I blogged the other day, prepare to read a lot about Robert Shiller, who will be described as “one of the only economists who actually ‘called’ the current economic meltdown.” Professor Shiller has written a book called, How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism and I predict he’ll be the rock star economist of 2009. (He doesn’t use the financial term beejeezes, however.)
Stories that challenge the premise that this is the worst recession since the Great Depression: When everyone from the President on down said we’re in “the-worst-recession-since-the-Great-Depression,” it was hard to argue anything else. However, historians who study these things will tell you that “worst” is in the eye-of-the-guy getting a bat hit upon the side of his head. This is certainly the worst event to hit the world’s global financial systems since sometime in the past, but the jury will be out for a while on how bad it really is/was. But because it is a banking meltdown and banking and media both have their unofficial world headquarters in New York City, could it be that the crisis may have been amplified a bit? And the “global” nature of the recession, could that not be more about the flat world we live in today, and not the relative severity of the downturn? I read blogs written in Europe and Australia every day, but I no longer even think that what I’m reading is global. This is my first downturn of such “flatness.” Is there such a thing as “not global” anymore? In other words, it may be the worst economy since the Great Depression — it certainly feels that way — but historians will determine that in several years, not pundits or people with political agendas.
Bottomline: My new reality has me cherry picking stories that cause the neo-narrative to jump out at me. So when I saw a story early this morning that had the headline, “Data fuels hope for US economic recovery,” I couldn’t refuse believing it.
Later: Thanks for the e-mail I’m receiving that is providing me links to examples of each kind of story. I don’t have the time to follow up this post with those links, but here’s a good example of the neo-narrative indicator, “the recession is bad, but not the worst since the Great Depression.”
Even later: Required reading: Nicholas Kristof on “Learning how to think.” It examines how we are willing to accept the predictions of “experts” despite their less-than-stellar record at success at it.
Later still: This post has received an instalanche of traffic.