I haven’t read Gross’ book but Teach’s review was a great primer in the idea of market bubbles – those times when prices for things reach an irrational level in relation to the value they offer as speculation begins and people begin buying things simply because they cannot imagine the price going down – they don’t intend on actually using the goods, only reselling to some more enthusiastic buyer a few months or years later.
It turns out the housing bubble we are watching explode is not the first bubble. Before the housing bubble we had the internet bubble – a time in the late 90’s when one might buy an idea scribbled on the back of a napkin for a million dollars only to find out it didn’t work, or a company mighty bravely add .com to their official name and see their value double overnight.
Before the internet bubble was the stock bubble of the late 20’s that led to the great depression, just shortly after Yale economist Yale economist, Irving Fisher, declared “Stock prices have reached what looks like a permanently high plateau.”
Before the internet bubble was the telegraph bubble, where American business invested millions into the idea of telegraphy, stringing wires hither and yon until sending a telegraph was so easy (and cheap) that everyone could afford to do it and the companies made no money, many of them going broke.
Part of Teach’s point is that bubbles happen. They’re a part of a market economy. I couldn’t help but read it and wonder though – where is this really going? Each successive bubble appears to be slightly more life-inclusive (involving more people at a deeper level). A few people invested in the telegraph. More people had money in the stock market. The internet bubble was about a greater number of users than the stock market (if not as investors, then as contributors). The housing bubble gave almost everyone a certain whack in depreciation if not at least a lack of expected growth.
What if the next over valued asset to explode is broader than the housing bubble (housing being a fairly universal element to our lives)?
What if the next thing to pop is our lifestyle bubble?
I’m not sure if it’s an original quote or not, but my friend Larry Harvey once told me that “Lifestyles are chosen from the vast vending machine of experiences.” In typical Larry-speak, it’s interpretable on several levels, but my take away was this – lifestyles are the result of a series of choices, far more than something thrust upon us, at least in a growing, western economy.
What if the lifestyle – the way we have become accustom to living, the level of comfort we demand, the ease we think is inherently ours, the normal we’ve believed to be normal only because we’ve never seen anything else – what if that’s ultimately unsustainable? What does a lifestyle market correction look like?
One thing that struck me about the stock market crash of the 30’s was how entirely unaware the experts were that it was coming. Reading history backwards, it’s easy to see…but in the moment it was unthinkable. Bubbles are like that – especially big ones. When you’re standing on the bubble it seems like the New Earth, not a boil on the rump of a rhino.
Matthew 7 refers to a man who built a poorly constructed home on a bad foundation and was hit by a storm, seeing his work destroyed. We nod and commend the man who built well…even wondering what the other guy was thinking. Didn’t he know storms come? Didn’t they always come? Why didn’t he prepare?
I wonder what they’ll say about us – if history will regard us as such imperceptive morons for not realizing that it is unsustainable for every generation to expect an easier life, more resources and ease for less work than any generation before us.
What makes it even more complicated is that this bubble is tied directly to our identity.
When the telegraph companies folded, a few wondered what they’d do. When the stock market crashed, many wondered how they’d pay their creditors. When the internet bubble deflated, a huge number of users were stymied – at least for a while. When the housing bubble burst, many wondered about where they would live.
When the lifestyle bubble crashes an entire generation will wonder who they are. We have allowed how we live to determine our identity, instead of allowing our identity to determine how we live. This bubble in the making is of eternal proportions…and wise is the man or woman who prepares for the market correction in advance.
Filed under: Uncategorized |