Divine economic insights through the anecdotes of cab drivers, corporate sponsors and restaurant employees.
For the last 25 years, The Skins Game has been a popular TV attraction for golf fans and anyone else who wanted a sport other than football to enjoy for a few hours on Thanksgiving weekend. While there are plans to resume the event this year, last year its sponsors decided to step aside and wait, letting the 2009 economy play through.
Corporations that typically sponsor everything from local music festivals to popular sporting events communicate quite clearly with their checkbooks, as can many local governments with budgets that are so tight that some resorted to denying us our constitutional right to Fourth of July fireworks.
Consumers can be equally expressive with their wallets. During a busy night at the airport, a cab driver shared his frustration that very few of the arriving passengers are electing to take a cab and are instead opting to ask family or friends for a lift home to save money.
When callers ask us, “What’s your take on the economy?” they are often reacting to what they hear on the news, or a disappointing investment statement. They want to take charge of their situation and learn to make appropriate choices for themselves.
Just as a cab driver can help shed light on consumer behavior, so can others that we interact with on a regular basis. When I ran a hedge fund in the 90s, we were always looking for the trends that would unveil the most prudent and lucrative opportunities for our investors. Like other firms, we had access to analysts’ research and opinions. We also had a secret weapon.
Nadia, the sister of our portfolio manager, was not only popular in her sorority, but she also had an eye for what was hot in terms of fashion and consumer trends. Her opinion as to what could catch on and sustain popularity was a valuable addition to the homework that analysts would do, and it teaches us a lasting lesson about our own skill as economists.
If you’ve never thought of yourself as having the technical skills of an economist, consider that you may have some innate ability and intuition, like Nadia, that can be valuable within the entire scheme of things. In addition to digesting the financial news, and analysis from pundits that try to give you an edge on what to invest in, why not also trust your own eyes and ears to help you make good choices?
What kind of things do you notice during your ordinary routines that can provide some insight? Does a crowded restaurant mean that people are feeling more comfortable getting out of the house and splurging? How busy are those parks and attractions over the summer, compared with previous visits? Have lines at the airport gotten longer or shorter? As Yogi Berra taught us, “You can observe a lot just by watching.”
One of the most fundamental principles of investing is, “Invest in what you know.” It means rely on more than what you hear and the opinions of others, and tap into your own knowledge that you have developed from your interests and observations over the years. It can also involve educating yourself to the degree that you have confidence in what you are investing in.
One way to start is by taking note of your surroundings and adding in some homework along with patterns you are able to see with your own eyes. Maybe you have a knack for, or an interest in, technology. This can give you an edge when it comes to recognizing which devices and applications will be in demand and help a tech company grow.
Your young children can guide you to innovative companies that repeatedly manage to create toys and games that become hands-down favorites of kids. Or maybe you play a lot of golf and there seems to be a brand of equipment that shows up in everyone’s bag. Pay attention to whatever patterns you see in your day-to-day life, and let your inner economist take notes.
Sometimes a rough economy can help us create habits out of necessity. We keep a closer eye on where our money goes, in the effort to hold on to more of it. We begin to build our cash reserves so that we can weather an unforeseen emergency. We create a debt repayment plan so that we can ultimately get out of debt and experience the freedom of making monthly payments to our own savings accounts.
And whether a sluggish economy helps us also rediscover the pleasure of entertaining at home and enjoying potluck dinners with friends, or makes us think about getting a library card for the first time in years, it can help us create habits that can benefit us for years to come, as we reshape our behavior and become more “fiscally fit.”
Even though we may be at a point in time where we can get a table at our favorite restaurant without waiting, we can still look forward to the day when we are once again making our way out of crowded airports and sold-out stadiums. And with any luck, it will be hard to find a cab.
This article originally appeared at Forbes.com on July 23, 2009.