18 October 2008

The Economy Intrudes

This blog has mostly been about things that I think people may find useful that can be implemented with computers, such as social networking, photo sharing websites, digital signage, health record organization and so forth. It's basic themes have been:

  • what things do people do need?
  • what products and services serve these needs today?
  • how to build products and services that serve unmet or imperfectly met needs.
  • how to achieve the quality and usabilty levels and price points such that consumers of these products and services will benefit from them.
(There has also some family history and personal reflections mixed in among this.)

This was based on the notion that if producers make things that enough consumers need and if they them well make well enough and cheaply enough then they will have a high probability of profiting from doing so. Then if this is repeated often enough by enough producers, many of the producers will become profitable.

Over the last month, the world has been reminded that the production of widgets to improve people's lifes requires at least two other components, a working finance system and favorable macro-economics.
  • The types of widgets I have blogged about require substantial development. They cannot be built without up-front investment or the supply of credit. Credit has tightened lately so many widgets that would have been built a month ago will not get built today.
  • As the economy slows and consumers become poorer or feel poorer they will buy less widgets and there will be less money for developing new widgets. (Cheaper and better value widgets may do better but total widget sales will decrease)
This is just the business cycle going through its downward phase. I am writing about it because I am seeing it impact the businesses I work in and the fields of endeavor I enjoy. My friends in Silicon Valley startups, restaurants and other small businesses have been telling me how the demand for their products and services has been slowing and how their credit has been tightening. In many cases they have thought their businesses have been at risk of failing. They are already turning their considerable energy and intelligence from innovation and implementation to building demand and trimming costs. I admired most of these people before this happened and now I find myself admiring them even more now.

5 comments:

Jasper said...

Some companies are still getting funds

http://www.nytimes.com/external/venturebeat/2008/10/29/29venturebeat-odysii-uses-15m-to-light-up-digital-signs-in-99776.html

Elizabeth said...

This article explains how to handle cost savings in an honorable way. This seems to be what your small business and startup owner friends are doing.

Turd Blossom said...

Thank our great leader for this.

Isaac said...

Things could be worse.

alex said...

Even USA hospital spending is declining: This year will be challenging for our entire industry, as many drivers of our business remain uncertain," said Jack Cumming, Chairman and Chief Executive Officer. "The severe and rapid economic downturn, resulting in a decline in hospital spending, has impacted Hologic's Breast Health capital equipment sales. While in early November we were cautiously optimistic, even in light of the faltering economy, we witnessed an unprecedented decline in demand for capital equipment at the end of the quarter, which impacted sales of our Selenia(TM) digital mammography systems among our hospital customers. Hospital systems across the country have responded to tightening access to capital by restricting capital expenditures, implementing tight spending controls and reducing personnel.">