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GP13Nov: Fear Itself
The Election of 2002. We’ve all heard a bunch of
Monday morning quarterbacking
about the recent elections, all the more pronounced from the many
journalists, pollsters,
and political hangers-on who called it all wrong. Bush’s magnetism,
Republican get-
out-the-vote efforts, a poor Democratic message, gerrymandering, and a host
of other
things are supposed to have accounted for the outcome. None of the above
seems to tell
us why the impossible happened. We ourselves would look to Kahneman to get
hold of
the elections and to grasp what’s up for society in general.
That is, America has been sideswiped by 9/11, the sniper shootings, and a
deep and
difficult recession that is much worse that our economic analysts
understand. Since the
macro-numbers do not seem too dramatic, they miss the terrible pain running
through the
workplace as well as the structural revolution coursing through the
marketplace. The
populace, we would guess, has a broad perception of dangers so great that it
fears loss of
life or property. For some, the opposition party is taken to be part of the
danger. Others
(in line with risk psychology) demand a huge assured premium if they are to
turn the
party of government into the streets. We would say that the perception of
clear and
present dangers is coloring our politics, our companies, and our consumer
behavior.
MicrotooSoft. On 15 January 2002, Bill Gates sent out an email to all
his Softees
announcing a new call to arms. It was entitled “Trustworthy Computing,” and
it said it
was high time to pay attention to security in the computer world. As we all
know,
Microsoft provides unstable systems that crash all too easily and that are
too easily
attacked by virusmongers the world over. Microsoft, however, is just the
best example of
the widespread focus on risk we predicted in our
Annual Report on Annual
Reports 2001,
which you can find on the Global Province.
Risk-Free Products. On 29 October 2002, the United Nations Economic
Commission
for Europe held a forum—“Towards Risk-Free Products: Balancing Consumer
Safety
with Trade Opportunities.” This, of course, is only a bureaucratic example
of how the
quest for security is coloring everything we do. Isn’t it interesting, too,
that GM’s one-hit
parade vehicle at the moment is the ungainly Hummer, everyman’s very
expensive
chance to tool around in a let’s-pretend defense chariot, this being an
adaptation of an
unwieldy and probably unnecessary military utility transporter? Then too,
there’s an
experiment some utilities are trying whereby they give consumers one
guaranteed rate on
their monthly electricity bill, a way to reduce uncertainty about future
expenditures.
Cable news, maybe all the news, now depends on terrible crises to sustain
viewership,
first offering up some gore to get us excited, and then dishing out some
silly soporifics to
free our minds of the scenes we should not have viewed in the first place.
In 1,000
ways, the marketplace is offering ways to battle perceived risk, even as
substantial risks
continue to increase, without control. This leads to a fortress mentality.
Best of the Week. Our thesis, then, is that
fears aplenty are driving people to strange
places and resulting in surprising, unpredictable behavior. Mark Twain must
have known
about such fears when he offered his healthcare advice: “Be careful about
reading health
books. You may die of a misprint.” That said, we will not counsel you to be
careful,
mindful of FDR’s admonition that “We have nothing to fear but fear itself.”
On the Cheap. So there are all sorts of things
to do and investments to make and actions
to take, because others won't. There’s a nickel to be made in buying second
mortgages,
because investors shun them in good markets, and detest them in bad markets.
Small
manufacturing companies don't get the attention of institutional
investors--too small and
supposedly too risky--but offer superior rewards because they are perceived
as too risky.
The trick, it seems, is not to flee to safety, but to go places that are not
as risky as they are
cracked up to be.
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