The World’s Economic Problems are Like 2 Cross-Wired Thermostats

Many years ago I did some work at a newly built manufacturing plant in Phoenix. The new plant was having trouble with its air conditioning system — the administrative offices were too cold and the manufacturing shop floor was too hot. While I was there it was discovered that a mistake had been made during installation: the air conditioning system for the shop floor had been wired to the thermostat in the administrative offices, and the air conditioning system for the administrative offices had been wired to a thermostat on the shop floor. It’s funny in hindsight: the people in the administrative offices would be cold so they would turn the thermostat up. The people on the shop floor would be hot so they would turn the thermostat down. Thus the temperature problem was created by cross-wiring the two thermostats.

I was thinking the other day that our world economic problems are similar.

Consumers

On the one side we have the consumers who are being battered from every direction. They’re losing their jobs, their 401(k) retirement accounts have lost much of their value, gas prices are high, home values have dropped, and adjustable rate mortgages are increasing their payments.

Business

On the other side we have businesses who are being battered as well. Consumers are spending less, so revenues are down. Investors are living in fear, so it’s difficult to fund new development or — in some cases — even generate enough cash to pay the bills. Other countries aren’t doing much better — it’s not just a U.S. problem. Businesses are in a slump, and the future doesn’t look great.

Like 2 Cross-Wired Thermostats

We have the same cross-wired situation between consumers and business. Consumers control the “temperature” of businesses, since their purchases make businesses successful. On the other hand, businesses control the temperature of the consumers, since they provide jobs and since business investment forms the basis for the stock market and those 401(k) investments.

See the problem? It’s just like in that manufacturing plant: The consumers are feeling “hot” so they’re turning down the heat on business by refusing to buy. And the businesses are feeling “cold” so they’re turning up the heat on consumers by laying off workers, tightening consumer credit and in some cases raising prices.

A Solution

Now in the manufacturing plant we had the option of rewiring, but that’s not an option for the economy. No, we have to live with the idea that consumers and business are interdependent — that’s what capitalism is all about. So what can we do instead to solve the problem?

In the manufacturing plant we needed to provide a short-term solution for our cross-wiring problem until the electrician arrived. So we set both thermostats to a “normal” position (one that wasn’t too hot and wasn’t too cold). Then we fine-tuned the thermostat settings by making small changes, waiting to see how it affected the other part of the plant, and then revising as needed.

How the Government Fits In

If you think about it, this is the same thing that the U.S. government has been trying to do (and probably other governments as well). The government has tried to take steps to make both business and consumers act like things are “normal” even though it’s somewhat artificial to do so. “Stimulus payments” and “recovery rebates” are ways of providing short-term money to help consumers begin to feel normal again. Government “bail-out” of banks and a few key industries is a way of helping business get back to normalcy.

So the solution is to have the government help consumers and businesses feel like things are normal on a temporary basis. And if things go right, then both consumers and businesses will begin to count on things being normal in the longer term, and the economy will recover. The stock market will recover, consumers will spend, businesses will once again become profitable, and out-of-work consumers will get jobs.

You’ve Got to Believe

Will this work? It worked for our thermostat problem in Phoenix, and I believe that it will work for the economy as well. I encourage each of you to believe it because believing in this solution is what makes it work. Like Dorothy in the Wizard of Oz, we’ve had the power to go where we want to go all along — we just have to use it.

So close your eyes, click your heels together, and repeat after me, “There’s no place like a good economy. There’s no place like a good economy. …”

Sidebar: A Business IT Application of this Principle

And while we’re on the subject of cross-wired thermostats, this metaphor works for Business and IT as well. Business controls the perception of IT, and IT has a large impact on the effectiveness and efficiency of Business. When Business views IT as failing, then Business tends to micro-manage IT. This usually results in further IT failures, since most people in Business don’t really understand IT. Thus we get a downward spiral, just like a downward economic spiral.

Sometimes we need to “push the reset button” on Business and IT views of each other, just like we’re trying to reset the economy. This gives both parties a chance to develop a new working relationship, and things can improve from there.

So if your company’s perception of IT is stuck in a downward spiral, call a truce, get everyone to agree to put the past behind you, and try to move forward with a new view of IT. If you’ve got the right people leading IT, then this will stop the downward spiral and start an upward spiral in its place.

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