“The only thing we have to fear is fear itself”
When President Roosevelt voiced these words he certainly was not referring to recent events, but maybe he should have been. In the aftermath of Sept. 11 a fear has gripped the American Economy and threatens to undermine the growth we have all enjoyed for the past several decades. Nowhere has this fear been more evident than in New York City-undoubtedly the site hardest hit by the assaults.
Fear comes in many forms and manifests itself in many ways. Among the more common forms of fear are: fear of the uncertain, fear of the unexpected, fear of failure, and, perhaps most importantly for us here in New York, fear of confronting the truth. This last fear may be the most insidious. It allows one to live inside one’s delusions until forced to face reality.
Sept. 11 was an external shock to a system already in correction. In the wake of the attacks a fear of uncertainty settled in. When might the economy recover? How would Americans respond? Nowhere was that more evident than in New York, where the New York Stock Exchange closed for four days, its longest closure since the Great Depression.
New Yorkers, however, are a resilient bunch. Several days after the initial shock wore off, life began to show some semblance of its former self. As New York and the rest of the country began to recover from the trauma of the attacks, threats of further assaults began to weigh heavy upon us. Fear of the uncertain quickly gave way to fear of the unexpected. Who could hear a jet fly overhead and not look up? Who could open a piece of mail and not wonder? Individuals became more concerned with personal safety than with economic recovery. Corporate offices tuned to CNN daily, and building evacuations became the norm, making it difficult to return to the normally frenetic pace of the New York business community.
Sept. 11 and the demise of the dot-com era dampened the enthusiasm for entrepreneurship in New York and throughout the country. The aftermath of the attacks quickened the fall of Silicon Alley and the Internet media companies that were its raison d’etre.
Without entrepreneurial activity, the American way of life and certainly that of New Yorkers is in jeopardy. Our capitalist system is predicated upon the concept of growth. All one needs to do is compare consumer debt with consumer savings to understand the psychology. Americans mortgage the future to live for today; growth is an essential element to ensure that the bill for that mortgage does not come due before there is an ability to pay it.
We cannot succumb to fear of failure. One accomplished venture capitalist once said that if one studied a business plan long enough one would realize that it should in all likelihood fail. Instead of following this principle, this venture capitalist cast aside his fears and had faith that a few good ideas might just succeed. It is this same faith in the future and in new business endeavors that has been challenged by the events of the recent past. This has manifested itself in an unwillingness of those whom the economy most needs-investors-to support the future. Both individual and institutional investors have shied away from making the long-term investment commitments that will rekindle the economy’s growth. As evidenced by the decline in the stock markets and private equity investments, America is suffering from a short-term focus and a fear of failure. This has been exacerbated in New York, where so much of the economy’s health is dependent on the health of the financial markets.
The Truth Is Out There
We now suffer from fear of confronting the truth. The traditional engines of the New York economy-the financial and media industries-have stalled, yet housing prices remain at historically high levels and consumer spending continues unabated. At some point there must be an adjustment of expectations. New York, like of the rest of the country, will experience its share of difficult economic times. We must confront this reality.
While the past year has been challenging and the worst may not yet be over, there is nothing inherently wrong with New York or with the economy as a whole. Economies go through cycles. Perhaps the current downturn is particularly painful, especially when measured against the unrealistic and unsustainable euphoria that characterized the late 1990s, but New York and the country will recover. They will grow and we will prosper. New York has always demonstrated an ability to bounce back, to overcome any obstacle. What we must remember is not to give into our fears; we must commit to move forward, we must have faith in the future and all the possibility it holds.
Darryl Wash is managing partner of Ascend Venture Group, an early-stage VC in New York City. He sits on the boards of PreEnroll Inc., Optate Inc., InZap Inc. and Pennoyer Capital Management.