What you don't know about economics can hurt you
IMAGINE living in an abstract painting -- a world where nothing is labeled. Where things are perceived but not understood. This is akin to the bewildering experience many have in managing the financial aspects of their business.
Economic literacy can transform that abstract, bewildering world of time and money into something you can manage. Because it is the science of choices and consequences, economics -- whether understood intuitively or formally -- is a prerequisite for business success.
There are two types of economic literacy that can help you be successful in your business:
» Awareness of economic trends
» Ability to apply economic principles
Being aware of economic trends and conditions can help you make better business decisions, and do what is in the best interest of you and your clients.
Being economically aware also can help you spot issues that will impact your business. For example, during periods of low unemployment (like now), recruiting and retaining key staff members may be more difficult. Rising energy costs may interfere with the confidence and spending power of your customers.
SOMETIMES I sit with business decision-makers and draw what I call an Impact Grid. In the middle square we put the company. In the next square we put the company's clients. In another, the client's customers.
In adjacent squares we put the company's partners and vendors. We talk about what impacts these squares. It helps business leaders think about the impact of economic factors: employment, interest rates, and so forth.
It also reveals lines of impact for specific scenarios: If client A's customers are hit with a shock (hurricane, bird flu, rising energy costs), then client A is going to experience a downturn in sales. That in turn will have other implications.
Fortunately, you can easily track economic conditions in Hawaii with the help of reliable online resources.
Be sure to take advantage of the Bank of Hawaii's Economics Web page at www.boh.com/econ.
"The Internet has reduced the cost of distributing timely and sophisticated economic information," said Paul Brewbaker, chief economist at Bank of Hawaii, "allowing us to concentrate our resources on higher-value analytics."
The Hawaii Department of Business, Economic Development and Tourism also provides an economic data page, at www.hawaii.gov/dbedt/info/economic.
"We encourage business owners to review these statistics for information that may impact their firms and customers," says Pearl Imada Iboshi, the state economist and economics research administrator at DBEDT.
THE SECOND important aspect of economics for business is the ability to apply economic principles to your personal finances and to your business.
To be successful in business, you must be in harmony with reality, and aligned with what is inevitable. To do that, you need to constantly hone your understanding of the science of choices and consequences (which is exactly what economics is).
Here are some recommended online resources for sharpening your economic insight:
ECONOMICS is the language of life -- that wild and wonderful intersection of time and resources where we are given opportunities and choices.
Being economically literate means you can address life with an understanding of what you see before you, and make informed choices. It's a lot better than living in an abstract painting.
, until recently a vice president and technology director at StarrTech Interactive, is a board member of the Hawaii Council on Economic Education. He is also an artist and author of "America 2076: Pop Technology and the New Future of Democracy." His first novel, "K-Street," is due out this August.