Look for the silver lining

Nov. 1, 2001
Most of the questions I have been receiving, especially after the Sept. 11th terrorist attacks, revolve around what is going to happen to the economy, to the laser industry and the telecom sector, and to jobs. The following is an overview to help you find your own silver linings.
1304qa Chang New

Most of the questions I have been receiving, especially after the Sept. 11th terrorist attacks, revolve around what is going to happen to the economy, to the laser industry and the telecom sector, and to jobs. The following is an overview to help you find your own silver linings.

A few useful generalizations to keep in mind:

  • People are intelligent and rational, most of the time.
  • We have a very resilient, responsive, and efficient economic system.
  • There are natural responses to an impulse excitation. A responsive system can return to equilibrium in a short time.
  • Appropriate behavior based on reasoning provides the damping mechanism to reach a new state.
  • Change is growth. Any organization or individual that hangs on to the past will likely be out of phase with reality, and therefore suffer.

With these beliefs as our premise, we can speculate what might occur based on logical deduction.

Economists are drawing a parallel between our war on terrorism and the Persian Gulf War. But given that the terrorist attacks occurred here in the United States, the psychological impact will be greater and longer lasting. As individuals, we are likely to spend less and also spend more carefully, putting off buying things that are more want than need. Governments have to spend more on defense to fight a different kind of war, and also put spending packages into motion to stimulate the economy. The Gulf War brought about a drop in the GNP on the order of a couple of percentage points and it may be a bit worse this time.

Savvy management does not expect the return of last year's bubble economy any time soon. Businesses are likely to become more prudent, having been reminded once more of the importance of sound business models and profitability. The same goes for the stock and IPO markets, and investing in startup companies. A correction to the excess of the last few years will take place, with the closing of companies that should never have been started in the first place. In the meantime, companies that meet the challenges of shifting demands will do well, while those that refuse to change will languish.

No one seems to know exactly when the telecom industry will recover. In reality, the answer is obvious—"never"— if recovery means the return of the "bubble." Business, however, will recover when carriers and service providers can afford to buy new equipment to meet customer demands and cut operating costs. That means when they can revert back to the old-fashioned way of doing business—a profitable business model to gain the confidence of the capital markets. This was nearly impossible for the incumbents, disrupted by predatory recruiting and competing on price with those who, with investment capital, did not have to deal with positive cash flow and profitability.

Still, a positive outcome of that "bubble" is that much of our current communications infrastructure has been subsidized by the investment community. At this point, most people are hooked on using the Internet. And, if they are like me, they don't want to deal with access lines that only work half the time, long-distance calls that take longer and longer to connect, or having to scramble to set up a conference call during the terrorist aftermath. Now imagine what's going to happen if video conferencing becomes the preferred mode of communication. We are already beginning to hear whispers of price increases, and I for one am willing to pay more. A layman's guess is that the turning point is not too far from right around the corner, and smart Wall Street analysts are murmuring that we're at a historic trough.

Our industry is in a better position than ever to play a significant role in a technology-driven economy. Remember, lasers and electro-optics are enabling technologies, with even broader applications than communications. And individually we are the innovators. We have historically been a close-knit technology community with little interest in business or management, or for that matter in manufacturing processes and even basic skills like engineering. The "bubble" has changed all that, and now we also have a much greater business bent. Opportunities are unlimited to anyone who can connect ability to a real need. And we can adapt to changing needs by continually adding new skills.

How do I view the future? Upbeat and optimistic. We are living through a correction, in a broad space that's moving toward a prosperous and peaceful equilibrium supported by solid fundamentals. Even today, business plans with a viable financial outcome can get funded, and it is a lot easier to start a business now than during the "bubble." What we can accomplish is limited only by our vision. Go for it! This is the beginning of a golden era.

About the Author

Milton Chang

MILTON CHANG of Incubic Management was president of Newport and New Focus. He is currently director of mBio Diagnostics and Aurrion; a trustee of Caltech; a member of the SEC Advisory Committee on Small and Emerging Companies; and serves on advisory boards and mentors entrepreneurs. Chang is a Fellow of IEEE, OSA, and LIA. Direct your business, management, and career questions to him at [email protected], and check out his book Toward Entrepreneurship at www.miltonchang.com.

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