Was it really the amount of risk taken in the past few years that triggered the financial crisis, or might it be the type of risks taken that are the real culprits? Perhaps, a simple case of too many eggs in one basket for too long? Yes, banks kept piling on debt securities from residential and commercial mortgages based on a model that had value increasing in perpetuity. Yes, hypermarkets such as CDX/CDS were created without anyone taking the initiative to add them all up and see if the insurance sold was actually more than the companies were worth. Yes, Investment Banks were allowed to leverage up to levels that had never before been implemented. But to me, that says that we took too much of those particular kinds of risks for too long and did not scrutinize the underlying assumptions nearly enough.
At the same time, we were under-funding, intellectually and financially, innovation in new technologies and revolutionary products. We cracked the code to the human genome a decade ago, and yet the average person sees little evidence of it in their daily lives. We seem to be lacking in our abilities to bring new discoveries and breakthroughs into marketable territory. Was it just a myth that we were in an era of great innovation, because we said out loud enough times that we actually believed it? Were the best and brightest young minds being shuffled to Wall Street because they are better salesmen? What can we teach and what can we do to promote and support entrepreneurs? Perhaps some of those investment dollars (many coming from overseas) could have been better invested funding innovation instead of financial securities. Funding innovation may seem like a much riskier bet, but I can promise the underlying assumptions would be a lot more realistic than the bets that were made in slam-dunk securities the last few years.
What I’m trying to say is that, as a nation, we seemed to have taken the easy way out (at least that is what we thought) and bet against what we knew was an inevitable cycle in hopes of piling on a bit more cash. Where is the innovative and courageous American spirit that this country was founded upon? Where is the spirit of the people who came together 2 short decades ago and created the impossible . . . a nation built solely on the promise of freedom? We have become complacent as we pretend to be a happy lug of androids that go to work, do what we are told, and go home. Now that we know it won’t work in the future, we have a chance to make some game-changing moves.
We need to harness those adventuresome spirits that lead droves of people across the entire country in wagons with no real idea of what lay ahead. Those are real risks, laced with dreams, passion, and courage. Many of us have become our own silos. We lack connections, challenges, and most of all the passion required to create real success.
The point is, if we are going to take risks, which we know is a part of life and business, we should take risks that are worth taking. Let’s not take the same old risks over, and over, and over again until we look a bit daft for not recalling that economies run in cycles. If we take risks in areas we are passionate about, and stop living up to the herd mentality, then we can make great strides in the growth necessary to push this next cycle. It’s clear that the same-old thing is going to work this time. Whatever we do must be different, inspiring, and creative. Most every industry is being forced to reinvent itself in one way or another, which is an open invitation to do better.
Broaden your lens, stand on your head for a new perspective. . . do something, anything, to ensure that you are taking a new kind of risk that has some passion and guts behind it.
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