There is no pie - How to find hope in the recession

“He who rides a tiger is afraid to dismount.”
- Chinese Proverb

Photo by claudiogennari

There is a surplus of bad news these days. A recent article in the Irish Independent said

"Forget about simply being a poor country. Unless Mr Cowen matches words delivered in chamber of commerce speeches with deeds, we will be lucky if Dublin is not on fire before the year is out."

Many of the people writing in the papers are expecting riots and mayhem, poverty and a return to the 1980s without the safety valve of emigration, as many of the other world economies such as Britain, the USA and Australia all have there own economic troubles.

All in all, pretty grim stuff.

"The Party is Now Over "

The Celtic Tiger is well and truly dead. Quite a few are waking up to a bad financial situation after many years of overspending and making bad money decisions. Others, through no fault of their own, may have lost their jobs or homes.

It can be very easy to lose hope. Our politicians and media are doing very little to help it seems.  Bad news reigns.

But it is better for you to be optimistic.

Hopeful, Happy and Healthy

According to Martin Seligman, the founder of Positive Psychology  - a new branch of psychology which focuses on the empirical study of  positive emotions optimists live longer, earn more and are happier than pessimists.

It boils down to what he calls your explanatory style - how you explain to yourself why you have experienced a particular event.

• Pessimists tend to blame themselves for negative events, believe that such events will continue indefinitely, and let such events affect many aspects of their lives.
• Optimists tend to blame things outside themselves for negative events, believe that such events will end soon, and do not let such events affect too many aspects of their lives.

So learn to see that this recession is not your fault and that it will not be around for ever. There are things you can do, being thrifty, learning to budget and living within your means for instance.

Obviously, if you have been made redundant or you are going bankrupt, your short term priorities may be different. But my point still stands, optimism is better for you in the long term.

The Danger of Learned Helplessness

There is a real danger that the country gets completely engulfed in an epidemic of learned helplessness. Seligman discovered in his career that after too much stress certain laboratory animals and humans would give up trying to achieve anything. 

He calls this Learned Helplessness:

"Learned helplessness is a psychological condition in which a human being or an animal has learned to act or behave helpless in a particular situation, even when it has the power to change its unpleasant or even harmful circumstance. Learned helplessness theory is the view that clinical depression and related mental illnesses result from a perceived absence of control over the outcome of a situation."

The important point is here is the 'perceived absence of control over the outcome of a situation'. It is only perceived. Quite often, there is much that can be done. Just because the economy has gone into recession does not mean that all your options are gone. There are many things that a person can do.

One of the first of these is to free your mind from the recession group-think now engulfing the country - Pie-based thinking.

There is no pie

 
Photo by net_efekt

You may hear Irish politicians and members of the media talking about the money situation in Ireland as if there was a giant pie shared by the entire country. Each of us has been too greedy and now we have to settle for a smaller slice. We may even have to fight for our slice!

However, there is no pie.

There has never been a pie.

This is what the entrepreneur Paul Graham calls the Pie Fallacy.

He distinguishes between money and wealth

Wealth is stuff we want: food, clothes, houses, cars, gadgets, travel to interesting places, and so on. You can have wealth without having money.

So what is money?

It is a kind of shorthand: money is a way of moving wealth, and in practice they are usually interchangeable.

There can be a certain fixed amount of money at times.The Irish Governments Budget at the moment, for instance.

But there is no upper limit on wealth. There is no fixed amount of wealth in the world.

This is the basis of the Pie Fallacy, mixing money up with wealth...

"What leads people astray here is the abstraction of money. Money is not wealth. It's just something we use to move wealth around. So although there may be, in certain specific moments (like your family, this month) a fixed amount of money available to trade with other people for things you want, there is not a fixed amount of wealth in the world. You can make more wealth. Wealth has been getting created and destroyed (but on balance, created) for all of human history."

He uses the example of doing up an old car...

Suppose you own a beat-up old car. Instead of sitting on your butt next summer, you could spend the time restoring your car to pristine condition. In doing so you create wealth. The world is-- and you specifically are-- one pristine old car the richer. And not just in some metaphorical way. If you sell your car, you'll get more for it.

By doing up the old car, you have created wealth. This wealth can be exchanged for money.

There's No Limit!

There is no upper limit on the amount of wealth that can be created in the world. Think about this.

• Before Apple came out with the iPod, where was the iPod market?
• Before TV was invented, where was the market for TV advertising?
• Before the telephone was invented, where was the market for mobile phone ring tones? :)

New inventions, new ways of looking at the world and new approaches can generate wealth every single day. You can create wealth by offering a service, selling a product or even selling ideas. This wealth can be exchanged for money. Add value and prosper :)

And here is the great thing about a recession. Wealth creation is still possible.

Hope.

The Bottom Line

So here it is:

Nobody has taken away your ability to better your own circumstances, to create more wealth.

Not the recession, not the Government and not the banks. You make that decision yourself.

Do not give up your future health and prosperity to the doom and gloom merchants and believe that we should all be pessimists. Being an optimist is better for you in the long run.

And remember, there is no pie :)

Comments

[Eoin O'Mahony]

Sounds like a pyramid scheme to me.

[Seamus]

Thanks for the comment Eoin, I can see what you mean. Wealth exchanged for money may sound like a pyramid scheme, but it is the essence of all commerce.

A Stradivarius violin is just some wood and strings until assembled and tuned.

Diamonds are just rocks until polished and cut.

Oil is just a carbon based fluid until drilled and refined.

An iPhone is a jumble of wires and circuits without the software and wireless access.

You create wealth and then exchange it for the local currency - whether that is the euro or bartered for chickens.

Nature produces the raw materials and humans transform them.