Recession to Hit Net Cos? Don't Bother Asking

Is a recession on the horizon?  Will it hit the Internet companies? 

The answer to the second question, at least, is almost certainly "yes."  Back when Internet advertising and commerce spending was a fraction of a percent of the total economy (late '90s), one could argue that the industry was growing so quickly that it would power through any broader economic slowdown.  Now, however, online advertising and commerce spending has reached a point where its fortunes are linked more closely to the general economic tide, so if the economy slows, brace for impact. (Which isn't to say the industry won't continue to grow faster than the rest of the economy--it probably will).

The answer to the first question, unfortunately--Will there be a recession?--is "No one knows, so don't bother asking."  As the NYT observed this morning, economists not only show no ability to predict recessions, they often can't even tell they are in them until after the fact (Back in 2001, when Greenspan was arguing that a recession could be avoided, the economy was already in one).  One factor that helped investors, analysts, and executives blow the 2000 turn, in fact, was that nearly every major economist on the planet was expecting the nirvana of the "New Economy" to continue for the foreseeable future.  And, then, whammo, the world ended.

Everything's obvious in hindsight, so when the next recession finally arrives, commentators will make hay and friends by pointing out the obvious signs that overpaid experts missed and bemoaning their apparent incompetence.  But ask these Monday morning quarterbacks what the economy will do next, and they'll suddenly hem and haw.  Because it turns out that there is no way for anyone to reliably predict what the economy is going to do over short-term timeframes, expert or no.  The wise people just don't bother asking.   

Comments

[Martino Mingione]

I know its a little off kilter but your posting reminds me of the story about Harry S. Truman demanded "Give me a one-armed economist!"

He was the first president to appoint a council of economic advisers. He actually liked to listen to them. However, he preferred a clear recommendation, which he rarely received.

He quickly grew tired of economists who gave a good recommendation, and then began, "On the other hand ..."