The
Markets
Behind the dark clouds of volatile markets there
appears to be a silver lining. That may be hard to believe when so many are
focused on whether economic weakness is due to bad weather or, well, economic
weakness, but here are a few of the signs that things may take a turn for the
better:
·
Business climate: On February 20, The Economist/FT
Global Business Barometer, which surveys 1,500 business leaders around the
world, found more than one-half of them expect the global business climate to
improve during the next six months and more than one-third plan to increase
capital investment in the coming year. A slight majority believe America will
have a greater influence on their regional growth than China.
·
Consumer confidence: Consumer confidence climbed for the second month in January 2014. The Director
of The Conference Board Consumer
Confidence Index® said, “Consumers’ assessment of the present situation
continues to improve, with both business conditions and the job market rated
more favorably. Looking ahead six months, consumers expect the economy and
their earnings to improve, but were somewhat mixed regarding the outlook for
jobs. All in all, confidence appears to be back on track and rising expectations
suggest the economy may pick up some momentum in the months ahead.”
·
Cash-rich companies: Corporate America is
sitting on a lot of cash – about 91 weeks' worth of net income, according to Barron’s. It has been using that cash primarily
for stock buybacks, but could use it for other things. An economist quoted in Barron’s said, "The purpose of the
capital markets is to fund growth… it's difficult to call this de-equitization
an economic equilibrium: Public companies should not make money just to buy back
stock."
Of course, positive prospects don’t mean everything is
coming up roses (especially not in this weather). Consider one of the effects
of stock buybacks which is there is a lot less stock in our stock markets than
there used to be. As Barron’s pointed
out, “The Wilshire 5000 may have seen its list of components shrink by half
since 1998, but its total market cap has doubled from $11.7 trillion to $22.5
trillion in that span. Unless you're a government statistician, you just might
call that inflation.” Oh! Inflation. That’s something we may need to think more
about soon.
what is an entrepreneur? Merriam Webster defines an entrepreneur as “one who
organizes, manages, and assumes the risks of a business or enterprise.” The Library of Economics and Liberty said successful
entrepreneurs find ways to derive greater profit from materials or skills while
unsuccessful ones don’t. The website shared this insight to entrepreneurship:
“An entrepreneur who takes the resources necessary to
produce a pair of jeans that can be sold for thirty dollars and instead turns
them into a denim backpack that sells for fifty dollars will earn a profit by
increasing the value those resources create… Losses mean that an entrepreneur
has essentially turned a fifty-dollar denim backpack into a thirty-dollar pair
of jeans. This error in judgment is part of the entrepreneurial learning, or
discovery, process vital to the efficient operation of markets.”
Knowing this, it’s not all that surprising that
traditional gauges of entrepreneurship measure things like the number of small
businesses or self-employed people or business startups in a country. According
to The Economist, these measures tend
to provide misleading results with Egypt often appearing to be more entrepreneurial
than America.
A new paper from the Research Institute of Industrial Economics offers a different way
to measure entrepreneurial success. It focuses on Schumpeterian
entrepreneurship. Austrian-American economist Joseph Schumpeter believed entrepreneurs
were innovators, people whose ideas and execution produced high-growth
companies that often upset and disorganized existing models for doing business
– think Thomas Edison and electricity, or Steve Jobs and Bill Gates and
computing.
The paper looked at Forbes Magazine’s billionaires list from 1996 through 2010 and
focused on self-made billionaires who earned
their dough founding new businesses. There were almost 1,000 of them in 50
different countries. (By the way, four of every 10 global billionaires are found
in the United States, predominantly in California, New York, and Texas.) The
researchers’ conclusion was the Forbes’
list offered, “an alternative – albeit imperfect – cross-country measure of
Schumpeterian entrepreneurship with more intuitive results than small business activity.”
“Think left and think right and think low and think
high. Oh, the thinks you can think up if only you try!”
--Dr. Seuss (a.k.a. Theodor Seuss Geisel), American
writer, poet, and cartoonist
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