Is American Dream now the Age of Less?

In a recent conversation with a friend at a meeting in which the buzz was all about social media, I said, “A few years ago there were only two methods of communication – putting a stamp on an envelope and picking up a telephone. Today communicating is like drinking from a fire hydrant with faxes, email, text messaging, Facebook, Linkedin, Twitter, etc., etc. There is a lot of water available, but it is going by so fast, it is nearly impossible to get a drink of water.”

A Bob Dylan song penned decades ago, “The Times They Are A-Changin',” had lyrics that are relevant today. The pace of change is accelerating. Little more than a year ago, most people were living or planning on living the American Dream. Today’s economic reality seems to be dismantling the very foundation of everything we have believed for most of our lives.
It is hard to find a piece of good news anyplace. Does this mean that the American Dream as we know it, is dead? Are financial opportunities which we have come to consider our birthright, gone forever? Will this country bounce back as it has so many times before, or are we destined to become a nation of has beens? Yes, “The Times They Are A-Changin' ” but the good news is that I believe the changes are for the good.

Here's Why:

1. Real estate appreciation of the last decade could not sustain the 10%-30% annual increases indefinitely.
2. Reckless lending (on Wall Street and by banks) and spending (by consumers) had to adjust at some point and when it did, it was with a vengeance that no one could have ever imagined.
3. Esoteric financial instruments that not even the people creating them really understood, and the financial models that presumably could manage the risk exposure, failed, creating an unfathomable domino effect, wreaking havoc with the world’s financial system.
4. Greed always leads to stupid decisions (i.e., trusting Madoff).
5. Unsound mortgage practices (subprime loans) by necessity create a situation in which the chickens come home to roost.
6. Esoteric financial instruments such as credit swap derivatives authorized by the SEC, allowed the investment banking community to throw caution to the wind and create as much as 30 to 1 leverage in the pursuit of over-sized profits
7. The focus on short term profits by investment banks allowed these companies to payout the now infamous monstrous bonuses.

What does all of this mean? Is the foundation of our capitalistic society broken and are we destined to be mired down in a financial abyss for years, decades or longer?

I don’t think so. This is what I believe. The USA has an immense ability to learn, adjust, and pick up the pieces and move forward. We will learn and emerge from an error of stupidity, smarter and wiser.

Also, the essence of this country has always been the entrepreneurial spirit. Entrepreneurs have always spotted opportunity in every recession. During the recession of the mid-to-late 1970’s when the prime interest rate was 20%+, people lined up at their neighborhood service stations to get their weekly rationing of gas, and the government temporarily implemented pricing controls to manage the runaway inflationary spiral at the time that had gripped the economy. When most people were losing hope, the entrepreneurial spirit did not die nor go into hibernation. Out of these turbulent times came Intel, Apple Computer, and Microsoft, with business models that enhanced our productive to heights that no one ever thought possible, fueling a new era of prosperity.

When the Internet bubble burst in the early part of this decade, there was blood running in the streets of Silicon Valley. The failure of numerous billion dollar venture capital backing “good ideas” and hundreds of smaller Internet companies, did not kill the entrepreneurial spirit. A new round of innovative entrepreneurs gave birth to the likes of Google, Amazon, and ebay, that blazed the way for to the newest social media explosion and the emergence of Web 2.0 companies such as Facebook, MySpace, YouTube, and LinkedIn, to name a few.

Yes, times are toug, but the entrepreneurial spirit is not dead, the American Dream is not dead, and the Age of Less is only a passing rage. Sanity will return to our economic system. Credit will begin to flow, entrepreneurs will again take risks and life as we know it will return – a little more prudent, but the American Dream will be reborn. The entrepreneurial spirit in this country will always adjust and push our way of life forward.

Will there be adjustments? Absolutely. Will jobs be lost, never to return? Absolutely. Will companies fall into bankruptcy, causing enormous dislocation and pain on an individual level? Absolutely. Will there be financial pain at every level? Absolutely. But this too will pass.
What should you do? Perhaps this phrase best summarizes my thoughts. “Those who stop, sit down, and fret about their situation, will get run over by those who are making things happen.”

Yes, the “times they are a changin' ”- but I believe for the better, and these changes will lay the groundwork for yet another cycle of entrepreneur ingenuity. Hail to the entrepreneur!