Can we will the world back to health in 2009?

OK, everyone, maybe if we all close our eyes and concentrate, we can make 2009 the year that everyone wants it to be – the year when the Dow returns to 5 digit territory, the year when the real estate market finally recovers, the year when IPOs outnumber Brad and Angelina’s kids.  Or maybe our hope for the year shouldn’t be that ambitious.  Maybe we just want a year of stability, one free of the drama on Wall St and Main St that became so commonplace in 2008…. Ah, look… the Yankees just signed CC Sabathia… weekend weather looks good… hmm… the federal government just bought AIG, that’s interesting.

It is said that psychology moves the market, so it doesn’t seem all that far fetched to believe that if investors will just wake up happy 3 business days out of 5, the bull market will return in no time.  The problem with that argument is that while investors may want to be happy and optimistic about the future, there are fundamental breakages in the economy that will continue to disappoint and disillusion even the most ebullient bulls out there.  And so the answer to my little question up there is a resounding NO.  We will not get out of this mess by hoping or thinking or wishing.  The only cure for our sickly economy is good old fashioned doing… and while I certainly don’t presume to have the entire exercise regiment figured out, I thought of a few things that might help:

1. Banks and lending institutions of all shape and size – yes, you had a tough 2008… <insert slapping sound> now get over it and start lending again.  You just got $350 Billion in hard currency.  Tweak your models or your divining rods or whatever it is you use to determine the credit worthiness of a business, but start doing what it is you exist to do.  Start lending.  Your industry is acting like Tom Cruise did after Goose died in Top Gun – you gotta shut it out and get in there, Maverick!
2. My fellow Venture Capitalists – now is the time to be supportive of your portfolio companies.  This is the time when you earn your fees – roll up the sleeves and help.  A CEO needs help thinking about a client pitch, get your backend down there and help him/her think about it.  This is also a time to be prudent – the character of the deals you strike in this environment will, in large part, determine the kind of return you can expect.  Good entrepreneurs know that the world has changed – if the public markets are down 40%, the private markets don’t somehow get a pass.  And to the entrepreneurs out there saying “no, you greedy VC, you shouldn’t be asking for tougher terms”, I say this – if the venture capital industry has a 5 year period like it had after 2000, there will be fewer and fewer firms out there with fewer and fewer dollars to invest in your next company.  Demand for capital stays the same, supply dwindles – hmm… what happens to the price you will pay for capital (in the form of percentage of your company)?
3. Government – yes, we all know you’re going to be spending like a drunken sailor for quite a while.  Couple of requests – 1) say no to somebody just to show us that there’s a limit to your beneficence and 2) remember that before all of this mess, socialism in Europe and socialism-lite in America were on the precipice of extinction.  Marx was wrong; we are all capitalists and capitalists we will remain.  Have fun as an owner of an industry or two, but give them back to the market when all of this is past us. 
4. Entrepreneurs and Innovators – sorry, but yet again, the burden is on you to help us grow out of this mess.  Drink more coffee or Mountain Dew or whatever it is you drink, and keep building great companies.  We all need you now more than ever. 

I know, I know – it’s not this simple.  But here is something simple that we can all do – take your game up a notch, whatever it is you do.  Work the extra hour, use the Draw-Align/Distribute function in Powerpoint a little more often so your slides look more professional, cut your fingernails more than once a month.  We may not be able to will ourselves into the black, but we can certainly work ourselves in that direction. 

 Stay tuned…

Tagged as: Bankers, Economy, Entrepreneurs, Government, IPO, Lenders, Venture Capital