Today I was talking about the economy with someone who I respect a lot. She said that we still don’t know how much of what’s going on in the economy is real and how much is psychology.
I respectfully disagreed. What strikes me most about this economic crisis is that what’s psychology is real. There’s no distinction any more. Sentiments drive markets as much or more than what’s “real.” And 6 months worth of sentiments might create real, irreversible hardships.
Her broader point, my rebuttal notwithstanding, is that people have short memories, and if psychology does drive markets then things have the potential to get better very quickly. A new President who has a successful first 100 days could set a good tone, and by the second quarter we could see the first glimpse of things no longer getting worse.
My worry is that enough real hardship will come from the psychology of fear we’ve lived through since October that a shift in mindset won’t be enough to avoid a protracted economic downturn.
Either way, it feels like we’re navigating between 2-3 years of things being bad and a Lost Decade a la Japan in the 90s.
So here’s the question if you’re in the nonprofit sector: is your current business plan, at a minimum, premised on things being bad for 24-36 months? And what if things are bad for a lot longer than that? Are you ready? And if not, what can you do to make yourself ready?
And if yours is the kind of nonprofit organization where the best and the brightest don’t spend much (or any) time thinking about the revenues side of the equation, don’t you think now is the perfect time to change that?