When The Tide Goes Out We Find Out Who Is Swimming Naked.

We have been talking about self-reliance; reliance on one’s own powers and resources rather than those of others, and I have come to the conclusion that our culture has moved people away from self-reliance towards almost total dependence on institutions.

What we are seeing now is a lack of resilience; the capacity to recover quickly from difficulties.

On self-reliance, I concluded that over parenting and over governing have been the major contributors to lulling generations into a false sense of security. 

One of the main reasons that resilience has not been discussed is that 28 years of pretended growth, a lack of wars close to home and a political focus on identity politics has meant that there has been nothing to resile from. 

There actually has been plenty to resile from over the last 120 years.

1914-18 WWI

1930’s Depression.

1938-45 WWII

1960’s credit crisis.

1970’s Collapse in mining, Whitlam, Fraser’s 17.5% devaluation.

1980’s Interest rates, tech wreck, pilot’s strike

1990’s Recession. 11% unemployment, Asian market collapse, Y2K.

2000’s GFC.

Since the floating of the dollar it has gyrated from even par with $US down to $US0.50, and back up to even par at least twice.

All of the above has meant that Australians and their companies have had to deal with far worse situations than a major slow down for a few months. The real problem is that in a supposedly risk adverse environment Australians and their companies do not appear to have a risk management strategy in place. Daily in the media there is a call for help indicating no self-reliance. Whole industries are screaming for help after a week. Shame on them. If you cannot get past the self-reliance stage what hope is there of resilience. 

Resilience requires stamina, planning, courage and fortitude but most importantly it requires a change to habits, processes, and strategy.

If you do what you did before you will just go back to where you came from. And once again language is the problem.

The dictionary has two meanings for the word resilience.

1. The capacity to recover quickly from difficulties; toughness.
2. The ability of a substance or object to spring back into shape; elasticity

Hence the language issue. Too many people are talking about the second definition which refers to a substance or object and not enough are talking about the first definition which refers to, amongst other things, people.

When Gabs and I started Executivechoice, a company that tried to help companies in trouble, termed a turnaround merchant, we constantly found that even when the pain was acute there was no realisation that things would have to change.

That was the problem with the Rudd, Gillard plan, throwing cash at people and projects so that we could continue on as before lead us to today.

The reality is that we are going to have to change, and that change is going to be dramatic.

The vast majority of families are going to have a reduced income in the next 12 months. It appears some expenses, such as mortgages, leases, or contracts will be funded by loans from banks and government. Those loans are going to have to be paid back. That means when things return to the new norm your old income will have to pay for your old loans plus the new ones. That is going to require a new budget.

Companies that have been struggling need to be put out of their misery. This was the big mistake Japan made after the crash in the 90’s. They let the weak live and the result has been no growth for three decades.

The weak must die, because the strong are not strong enough to bounce back themselves and carry the weak with them.

Resilience is about changing shape in order to recover quickly. Courage, stamina, fortitude and planning do not constitute resilience. 

 I remember in about 1988 I was watching my nephew play football for Auburn State School with my sister. I was paying myself about $35,000 per annum at the time but had just employed a 2IC on $40,000. I was saying that my peers were earning $100,000 plus in non-wealth creation industries and lamenting that I thought that was unsustainable. My sister kicked me in the shins. She bent over and said quietly that there were 6 people in earshot that had been “put off” in recent times. They had all driven there in their beemers and mercs.

We do not seem to be very good at even understanding the lessons let alone changing our ways to deal with the issues.

On resilience I am concluding that over parenting and over governing have not required our culture to be resilient because they do not demand change.

The tide has gone out and many have been found out with poor balance sheets or no possibility of making profits. They can’t be allowed to yell COVID-19 did this to me. On the other hand, if you tax the strong to reinforce the weak we will start running around asking Who is John Galt? Ayn Rand wrote this so explicitly in 1957, how good was that?