It’s normal to make mistakes when you are getting things done. What is not good, and sometimes even disastrous, is to keep on making the same mistake. A lot has been written about the so-called Lehman Brothers crises. We recently "celebrated" its tenth anniversary.
We have almost forgotten that something similar happened at the beginning of the century, when the dot-com bubble burst. With the internet boom, the investors were spraying dollars into just anything - all that was needed was an idea and media attention (no one was interested in the reality of a business plan or return of investments); a mortgage would be given to anyone in 2008 (their income, job or solvency were irrelevant).
But the dot-com bubble hit just some imprudent investors and a few big companies that had purchased illusionary assets. It wasn´t primarily the big banks that suffered the consequences of the financial crisis, those were saved – "too big to fall" as it was presented. It was all of us who suffered, including the Czech Republic thrown into the recession.
Characteristics of a crisis
What defines similar slumps that are by far not representative of the financial sector only?
Unpredictability – those who "have always been saying that" suddenly appear when the crisis is in full swing.
Short-sightedness – we succumb to the illusion that the highest mountain is the one we see on the horizon. What we don´t see and don´t understand doesn’t exist.
Megalomania – we strive to create the largest units possible rather than decentralise. More is sometimes less. A good example being the budgetary allocation of taxes – municipalities manage their resources better than the State.
Compass (regulation) shows the direction but cannot navigate the ship.
The power is concentrated with those who don’t look for alternatives.
What is the way out?
Is there a recipe so that we could get out without a shirt but still not quite naked next time? Common sense is a good start. God or Nature created our bodies with two ends – we sit on one and we think with the other. We need to make sure we are using the right end for thinking.
You won’t be out of trouble if you spend more than you earn.
You cannot pay for financial security with a loan.
It’s harder to manage surplus than shortage.
Too big hurts and leads to stress.
Avoiding problems is not good enough when they must be actively dealt with. Innovation occurs in times of trouble, encourage it.
Ancestral wisdom and common sense
The most important thing to do if you find yourself in a hole is to stop digging (a quote attributed to a famous American investor Warren Buffett, who missed the dot-com bubble and allegedly slept through the Lehman Brothers crisis).
Our ancestors used to say: "Now that the sun is shining bright, have your umbrella fixed and right."
And when someone tries to advise you, remember Nassim Taleb´s book Black Swan, where he says: "If you want to know anything about financial markets, ask either a New York taxi driver or a financial analyst. The probability that the advice would be right will be the same, except the taxi driver is not pretending he knows what he is talking about."
ABOUT THE AUTHOR
Ivan Pilný (born 6th July 1944 in Prague) is the Deputy Minister of Industry and Trade. He was previously a Member of Parliament of the Czech Chamber of Deputies of a Czech for political movement ANO 2011 (Action of Dissatisfied Citizens) and the Minister of Finance.
He graduated from Electrical Engineering at the Czech Technical University in Prague and worked in several state companies engaged in the area of computer technology. He became an entrepreneur just after 1990. Furthermore, he established the Czech branch of Microsoft, where he acted as the CEO between 1992 and 1998. He was the Director of Association of Information Society, before leading the Czech Telecom between 2000 and 2001. He later became the CEO of an alternative operator eTel.
In 2003 he was appointed the President of TUESDAY Business Network and in 2005 he founded a public benefit organisation We work smarter. He is an author of several books (inter alia "You Can Do Better! Exercise Your Brain!" or "The Arena of Information Age"). He is also known for a television programme Day D.
In 2009 Pilný was one of the co-founders of political party Citizens.cz, but he was elected into the Chamber of Deputies as an independent candidate on ANO 2011´s ballot four years later (he joined ANO in 2014). He held the post of the Minister of Finance from May to December 2017. He did not stand in the election of 2017 and was an unsuccessful candidate for the Senate this year.
He is married, father of four children. He enjoys studying how the brain works, likes reading, cycling and playing tennis (as he puts it "with enthusiasm but very poorly").