Make Your Own Lifeboat Before We Hit the Iceberg

Ken's Blog

A few days back, I posted about the tailspin that the U.S. and Europe are in. That tailspin is basically irreversible, barring a miracle. And it's not a good idea to plan one's life on the basis of miracles.

That post talked about "Shuffling the Chairs for the Best View of the Iceberg." Today, let's talk about a more positive aspect of the metaphor... lifeboats.

Don't count on "the Titanic" (your government, wherever you may be) to have enough on hand.

With my last post, I wanted to take the temperature of folks to see if they "got it." Is patriotism blinding or are people starting to see the iceberg?

In general, it seems, we all seem to agree that an iceberg looms, with a varying degree of clinging to hope. I can only suggest...

Hope that a miracle will happen, but don't turn "miracle" into "maybe." Uncertainty will freeze you where you are, deer in the headlights. More on that in a minute.

There were two recurring questions...

"As the great economies of the world go down (U.S. and the E.U.), are they not going to take these smaller nations down as well?"

-and-

"We're building e-businesses, but if our potential customers (the masses) are heading for that iceberg, how can they afford to buy our products from us?"

Excellent questions!

It's important to remember, even at the worst of the Great Depression, that unemployment was "only 25-30%"...

http://en.wikipedia.org/wiki/Great_depression

How can I say "only?"

Well, it's the reverse of the old baseball saying... "Even the best hitter fails 2 out of 3 times."

At its worst, 3 out of 4 people were still employed.

Yes, it's true that everyone suffered. But everyone also had to get on with life. People still had to eat, get dressed and have a roof over their heads.

Business still supplied the needs and wants of people.

Here's the key point...

Not everyone suffered equally. And not all businesses were affected equally. For one thing, businesses that catered to "needs" did better than those who supplied "wants."

Unfortunately, more and more of business today seems to focus on "wants" like iPods instead of "needs" like green energy (where our best and brightest should be heading).

Let's look at business in another way to see if the "we'll all be decimated" assumption is valid...

If you have an e-business (solo proprietor - YOU!) and your gross income is $60,000 per year, that amount is pretty much your net income, too.

However, if you have a small offline business (a bakery, let's say) with a gross income of $1,000,000 per year and a net of $100,000, you are a lot more exposed, thanks to all that overhead.

The former can afford to see a 50% drop in gross and still make $30,000. The latter goes bankrupt unless the owner can chop at least half of his staff, renegotiate his lease, etc.

And if YOU work for a large multi-national, well, you're powerless. You've got a 1 in 4 chance of losing your job, unless the company goes bankrupt (in which case it's a 100% chance).

What else makes a difference?

Those who "get it" and see it coming first have a huge advantage.

Which is better, being part of a run on the bank? Or being there a week before the run?

From investment choices, including where to keep your money, to where you live, to how you earn income, you control a great deal about what happens to you now.

Once you hit the iceberg, however, "le jeu est fait." (Game over!) If you have dealt yourself the right cards, you won't be a big winner. But you lose a heck of a lot less.

Most people won't leave their countries, for many reasons. Only YOU can decide upon the rewards of staying at home.

Do be aware of the cost of staying...

This is the first generation where enough people are truly mobile enough to make a difference.

Instead of a "run on a bank," consider what a government will do when they perceive a "run from the country" taking shape.

Those who try to leave later will pay a higher price for doing so. I fully expect, for example, that we'll see Canada put a high tax on RRSPs (the Canadian version of IRAs), as baby boomers leave the country with them, taxed at only 25%.

-----SIDEBAR-----
I'm no activist.

It's hopeless to change the system. Why waste my life doing
so? Better to leave and live the life I wanted.

Ironically, if enough people quietly voted with their feet,
that would be THE sole movement to teach government that
they are there to serve us.

Without us there, power is pointless.
-----SIDEBAR-----

Speaking of relocating...

Some countries are going to be hit harder than others. Developed nations have more to lose. And you can get by much better on $30,000 in developing nations such as Panama or Chile (or Ecuador and Uruguay or India) than you can in London or New York, Munich or Montreal.

Yes, everyone loses when the iceberg hits.

The good news is that we are not all hit the same. YOU make your own lifeboat. Or not.

All the best,