How Greece and the Stock Market are Conspiring Against You

If you’re a news person or you follow finance then you’re no doubt already aware of the situation in Greece. That country is a mess. It’s debt is astronomical; it has no capacity to repay; the political situation is volatile at best; there are mass protests, and nobody has any idea what to do. That’s my definition of a mess.

Let’s Help or Face the Mess Ourselves

In order to prevent some kind of catastrophic ruin that affects the governments and finances of the rest of Europe – after all, Greece is on the Euro and its economy is intimately tied to the rest of the continent – European leaders have been working on some kind of deal to manage Greece’s debt (a large part of which they’ll just dismiss or fund) and get its economy back on track.

And Greece isn’t the only European country riding this roller coaster. It’s just got it the worst right now and is in the lime light. Spain, Italy and others are also going through quite a bad spot.

With the state of the world’s economic intimacy, we’re all affected by the situations around the world. Hardly a country is free from the ripple effects dealt by other members of our global union. But what’s fascinated me recently is the degree to which that intimacy is more emotional than logical.

Up and Down and Up and Down

As I’ve watched the stock market plummet and rebound over the past month, I’ve seen that movement tied disturbingly to our reactions to Greece’s economic situation.

When news came that Greece was tanking and talks were stalled, the market dropped. Last week, as news landed that Europe had reached an agreement on how to bail Greece out, the market rallied 340 points. Yesterday, the market closed down nearly 300 points. Here’s how CNN explained it:

“New fears about the fate of the European rescue plan reverberated through stock markets in the United States and around the world Tuesday. Following European markets, U.S. stocks ended sharply lower across the board. Bank stocks were hit especially hard. The bad news was propelled by Greek Prime Minister George Papandreou’s surprise announcement that he would put his country’s participation in last week’s European debt plan to a voter referendum.”

Now, I understand that the stock market is not merely a bunch of mercurial people making decisions but an enormous number of trades made on the backs of incredibly complicated financial equations and algorithms, but when it swings so violently back and forth at news about Greece, I can’t help but think that things are getting a little ridiculous. And this is just news, mind you. Nothing is actually happening in any of these instances. A deal was reached but no money moved. A referendum was proposed but no vote actually taken. These may as well be rumors for the bearings they should have!

Don’t Be As Smart As the Last Person You Talked To

This reminds me of the business leaders I’ve dealt with who change their entire course of action every time they talk to someone. As I pointed out in my 5 Foolish Faux Pas of CEOs in Crisis, some CEOs are only as smart as the last person they spoke to. That’s what our economy feels like: as though it’s only as strong or relevant as the last thing it heard.

And I don’t want you to be this way!

Making plans and sticking to them is an important part of being a good leader and developing and growing a sustainable business. It’s especially important when you’re in a crisis. You can’t be flopping all over the place in rough times. Of course you change course when things are going wrong and you actually take the time to evaluate the situation, but if you’re changing plans after every conversation your people will lose faith in you and nothing will ever get done.

How do you keep focused when things around you get topsy turvy?

Assumptions, Assumptions – Who Has My Assumptions?

If you look at the history of big obstacles in understanding our world, there’s usually an intuitive assumption underlying them that’s wrong.
– Jeff Hawkins

You may have learned in your college economics class that controlling for all factors is necessary when trying to understand a task or a problem, but the real world rarely allows us to do that. Thus, we must make assumptions.

What are assumptions? In mathematics, an assumption is something taken for granted, based on which theories are formed. In the business world, we don’t and shouldn’t have such a firm view of our assumptions. Things rarely, if ever, work as we assume they will. Indeed, in business, assumptions are not facts; they are closer to educated guesses – and, since we’re preparing for them, hopes.

From the moment you wake up, you begin making assumptions. Some assumptions, when they are wrong, will not hurt you as much as others. Assuming you can arrive at the office in 30 minutes in rush hour traffic may make you late for a meeting, while overestimating the demand for a new product even slightly may require you to adjust revenue forecasts significantly.

The ability to make well-reasoned assumptions in the business world can make you very successful – if they’re right.

So, the question becomes, what do we do with assumptions? The answer: contingency plans. If assumptions prove wrong, we need contingency plans (and we often still need those contingencies when assumptions are right, too).

Contingency plans may be the ability to run a factory 24 hours for a week, a cash reserve, property that’s ready to sell or any number of things, but knowing your options and keeping lines of communication open with others who affect these plans is all part of being a good leader.

Wherever there are assumptions there must be contingency plans.

How do you make assumptions? Do you often go with your gut or do you strive to gather every piece of information you can before making an assumption?