IT and the Business Climate

This week we have seen a broadening of the financial crisis as auto-makers and other businesses have started to be more directly affected. In the case of the automakers, they can't sell as many cars because people can't get financing as easily.

One looming question, though, is why other industries have not been affected more by the mortgage crisis and all its banking-and-insurance-industry fallout.

Is it simply because consumer confidence has not fallen that low and because individual consumers have not been hit as hard as we think? If that's the case, continued real estate price drops may quickly sour consumer sentiment further.

The fact is, we still have not actually had a recession, in the technical sense. We also still have not seen the surge in unemployment we might expect. Perhaps these things will materialize soon. Perhaps not.

I think that one factor is that businesses, due to improved IT, have been able to adjust very, very quickly to changing conditions. When you have good systems, you can quickly adjust inventories, workforces, etc... Whereas in the old days it may have taken a manufacturing company 3 months from the start of a panic before genuinely changing its purchasing strategy and inventory levels, I think that today's technology allows them to change their behavior in under 3 weeks.