Bad News, Good News

When Jon Stewart interviewed Alan Greenspan several months ago, he asked why we need the Fed if free markets are efficient. The former Chairman’s answer indicated just how strong a role human psychology plays in the economy. He explained that our overreaction to both good and bad economic news needs to be dampened and that’s what the Fed does.

At the beginning of his term, President Obama was criticized for being too negative when he spoke about the economy.  Yesterday, he gave a more upbeat assessment.  CNN contributor Ed Rollins suggested a change in tone was necessary, given that our taxes our due today.  I suspect, however, there’s more to Obama’s strategy, and that he’s consciously managing the psychology of the American people. His example is one managers can learn from.

Brain science teaches us that the “unexpected” stops the mind’s automatic processing, and a failure or crisis is a powerful “unexpected.”  We’re stopped in our tracks, and so we stand back, reflect, and think about what we need to do differently.  This is a necessary step if we’re to change our behavior, but the accompanying fear also slows down the mind and narrows our vision.

When we’re optimistic, the mind speeds up and makes more connections. We become smarter. In tough times, we need to be stopped so that we can learn and change. But then we need to summon all of our mind’s potential to turn things around.

Managers should take this lesson to heart.  Hard times can be a great opportunity.  They prompt us to rethink what we’re doing and they make us more willing to change.  But if we’re to make the most of change, we need to be optimistic going forward.  Perhaps the most critical thing for managers to do in times like these is to express their confidence that things will get better.

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