Mike Harris's Blog

I spent last week talking about my book to over 1000 entrepreneurs in Bury (nr Manchester), Milton Keynes, London and Newport (S Wales) .

As with the last event in London in July I was bowled over by the enthusiasm and passion people can bring to creating businesses and turning ideas into money.

People were keen to hear my view on the economic crisis. I don't have any special insight but for what it's worth here is what I told them:

1.This is the seventh economic crisis I can remember since I started work in the city in 1970

2.The prediction of the end of the world and/or the end of capitalism was common to all of them

3.What was said in the eye of the storm (like now!) almost always turned out to be wrong and the crisis and its aftermath were only really understood long after the event

4.The one that scared me most was in the early 70s when the oil crisis (prices quadrupling over night) , combined with a banking crisis brought on by the collapse of commercial property values, coincided with a miners' strike, power cuts and a three day
week, together with:rampant inflation and falling stock markets

5.Banks always get into trouble in recessions - it's just that this time global digital news and blog comment , 24 by 7, has caused panic and a liquidity crisis of vast proportions at mind boggling speed.Should the liquidity crisis cause a systemic failure in the financial system it would be much worse than a depression; the modern economy depends on global banking and global payments much more then it did even 10 years ago let alone 70 years ago;if the big banks fail everything fails

6.We are nowhere near there yet and the authorities would have to be outrageously inept to get us there from here; in fact given the scale, speed and unprecedented nature of the crisis I think they have done rather well so far and I expect there is much more to come; the banks will be secured.

7.People should nevertheless prepare for a significant downturn and a reduction in revenues over the next 18 months; it feels like a nasty recession comimg on , but not a decade long depression or worse

8. Recessions create great opportunities for innovation. It's like a forest fire - some trees are destroyed , but the ones left have more room to grow and there is room for many new shoots of growth. If you think about it Silicon Valley emerged in the great
Amercian depression in the 1930s, The PC industry (Microsoft and Apple), the enterprise software industry (Oracle, SAP, Computer Associates) and Biotech all emerged in the 1970s recession and the dot com world came out the recssion in the early 90s.

9. Take heart from the fact that two of the most astute investors of modern times , Warren Buffet and Anthony Bolton both see buying opportunities in today's market and are putting their own money where their mouths are.

To cap it all here is what Bill Gates just said (quoted in numerous news sources)

Buffet, Bolton, Gates and Harris might all be wrong of course! I suspect we shall see over the next couple of weeks.

By the way there is another opportunity to hear me speak on innovation (and economic crises!) at the Foundation Forum on November 5th. Details follow: