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Thursday, August 19, 2010
Initially, I expected this blog would be something about summer vacations and the value of taking a break from daily routines. Or maybe take a look at why New Hampshire (where I vacationed this summer) has seen a level of economic growth above what most of the rest of New England has seen. Instead, I’ve been so intrigued with The Black Swan that it has unexpectedly distracted me from those ideas. Nassim Nicholas Taleb’s book The Black Swan: The Impact of the Highly Improbable, is so full of ideas that probe into other areas of life that it compels me to share it and to think about what its ideas might imply for working on economic development projects.
The title indicates something unusual. Black swans exist, but they are very rare. Taleb uses the concept to suggest an unexpected event. But not really just unexpected; it is an event beyond human knowledge until it happens. The three attributes that Taleb uses to identify a black swan event are:
- It is an outlier, an event that lies beyond our expectations
- Its occurrence results in basically incomprehensible changes
- Once it has happened human nature requires us to concoct explanations that provide reassurances regarding future occurrences that could have similar impacts
The Black Swan was published in 2007, just before the crash of the global financial markets in 2008. Although Taleb predicted the crash, and the crash provides a great set of examples of a black swan event, Taleb was not concerned with being prophetic, in the sense of predicting the future in the book. Rather the book presents a philosophical structure that Taleb had woven into his thinking long before the writing of this book or the most recent economic crisis. Thus Taleb becomes a prophet in the sense of someone presenting a critical alternative perspective in any number of activities we pursue.
The most critical implications that I derive from this approach is that we tend to not know as much as we think, and that, what we don’t know will be quite relevant to us. Taleb provides a wide range of examples, but one relevant example is related to the Wall Street “Quants,” the model builders and risk managers who feel confident in their ability to estimate risk and assume that the only information they need is present in the recent history of stock prices and trading volumes. Taleb suggests that this approach is extremely naïve in that it is oblivious to large structural changes that will impact stock prices far beyond what could be expected by the recent historical prices.
The challenge, however, seems to be relevant to more basic economic development analysis and projects as well. Trying to incorporate Taleb’s approach into economic development projects would require a number of considerations. These include:
- Being aware of, and clearly articulating, the assumptions that are being made
- Knowing how the data are compiled
- Understanding the standard errors in the data
- Limiting the inferences from the data to what is appropriate
- Seeking out and listening carefully to local knowledge;
- Considering projects that strengthen the basic infrastructures of a community
- Being aware of the social and cultural dynamics that will interact with a project
To the extent that economic development strives to make lives better, it seems appropriate to incorporate into development strategies and project planning ways to reduce the negative impacts from black swan type events. If you think the “Highly Improbably” part of the subtitle is a good enough reason not to think about these sorts of ideas I’d encourage you to spend some time with the book—it is very readable.
- Dale Shannon, CERC, Senior Economist
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Thursday, August 05, 2010
As a recently minted United States citizen (January 2009), the recent party elections offered me the first opportunity to exercise my right to vote in a primary thanks to my naturalization privileges.
I was proud to cast my vote, but was quite surprised at the low voter turnout statewide given the serious challenges that face Connecticut in the next four years. In my hometown of Fairfield, for example (according to the Secretary of State’s web site), while 5,153 votes were cast for the gubernatorial candidates, the statewide total was 300,130, which averages to approximately 1,775 per town.
Nonetheless, the candidates for Governor have emerged and the countdown to November 2nd has begun. As an economic development professional, and not just a new citizen, I will be paying close attention to the campaign as both candidates have been emphasizing assistance to small business and job creation on their campaign platforms. I am hopeful this will translate into renewed investment in economic development marketing, business recruitment and retention and expansion activities – all crucial efforts to grow Connecticut’s economy.
As an official fellow “American” now, I urge everyone to conduct their due diligence in the next 12 weeks, and proudly cast your vote to determine Connecticut’s future this November.
- Stephen MacKenzie, CERC Senior Vice President
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Thursday, July 22, 2010
Everyone's doing it - tweeting, friending, connecting - but you just don't have the time to add one more responsibility to your plate. Guess what? You don't need to spend hours a day updating your social networks. In fact, you don't even have to hop from web site to web site - you can manage all of your social media efforts from one place in a matter of minutes by signing up for a free account on a site such as hootsuite.com. Hootsuite allows you to organize your networks, spread messages, monitor mentions, track results, schedule updates and more on sites like FaceBook, Twitter, WordPress and LinkedIn - not to mention it saves you time, and perhaps your sanity. Why should you give a hoot? Because social media is not going anywhere anytime soon, and if you're not "LinkedIn" to this latest trend, then you're going to be left in the dark. So check it out - and get your feet wet by choosing a couple of sites to target your energy on at first and you'll see that it will be worth your while. Need help establishing your social media networks and planning your strategy? CERC's marketing department might be able to help you with your efforts - contact Kristi Sullivan, CERC's VP of Marketing.
- MaryAnn Simkewicz, CERC, Marketing Account Supervisor
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Friday, July 16, 2010
Planning is a key component for any business and it all starts with the business plan. Have an idea and want to make a business out of it? Write a business plan. Entrepreneurs often have multiple ideas and write a business plan for each in order to identify the feasibility of them. If one idea doesn't work, move on to the next until you identify the one that you think will succeed. Bottom line, the likelihood for success after writing a business plan is far greater than if you do not have one. A well developed plan is not a static document - it should be constantly evolving and needs to work for the business now and in the future.
Now, I'm not saying that the business plan is the end all be all when it comes to success, but it certainly lays the foundation for a solid business. There are many variables tied to a successful business - some within and some out of the entrepreneur's control, but being prepared is imperative. One of the biggest mistakes an entrepreneur can make is to rush into a business venture. Entrepreneurs need to take the time to thoroughly research their ideas, including talking to people experienced at starting businesses in the industry or to people who work with others starting businesses, and surrounding themselves with the resources that support them.
Need help? There are many resources available in Connecticut to help entrepreneurs succeed, such as:
O.K., now that the business plan is done, go ahead and start planning some more with a strategic plan, marketing plan and so forth. The work is never done!
- Elizabeth Wallace, EDP, Director of Smart Start/Connecticut Licensing Info Center (CT-CLIC)
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Friday, July 09, 2010
On July 7 I attended an investment outlook event sponsored by TD Bank. The keynote speaker was Robert Gorman, Chief Portfolio Strategist, TD Bank Financial Group. Mr. Gorman presented some concerns and strengths of the national economy.
Among the highlights were the following:
- The rate of economic recovery is slower than average recoveries. However, there has been some economic growth.
- Monetary policy has been generally accommodative, meaning that the central bank increases the money supply in order to ease the availability of credit.
- The oversupply of residential housing is still a concern. Foreclosures are still occurring because adjusted rate mortgages are coming due and unemployment is still high. However, the price adjustments along with low interest rates improve affordability, which will help sales over the near term.
- Commercial real estate is another concern because there is an oversupply and reduced demand. There were many refinances in 2006, and these will be coming due in 2011, further exacerbating the problem because many will have property values that are less than the loan values.
According to Mr. Gorman, the U.S. is in the second year of a four-year economic recovery period. Economic conditions are improving, although slowly, and the chance for a double-dip recession is not high.
After Mr. Gorman’s speech I felt somewhat optimistic about the overall economic recovery. I was not ready to start dancing down the street, since there are two more years to go in this economic recovery, but at least we are about halfway through.
- Alissa DeJonge, CERC Director of Research
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