Avoid the Dangers of Availability Cascade

Jim Blasingame

The economy is one of the big stories for 2008. And as business owners, it's our job to keep up with the issues that are impacting this economic universe in which we operate.

The good news for small business is that the vast sources of information that can contribute to better management decisions, which once were the private domain of the big guys, are now fully available to us.

But, alas, so much information can also be bad news when it morphs into a phenomenon called availability cascade.

The simple definition of availability cascade is when we read and hear in the media about an issue so much that we accept it as reality. For example, when so-called experts discuss a possible economic recession ad nauseum, we may begin accepting the hypothetical as reality. And availability cascade is made manifest when we, as consumers and business owners, make buying and operating decisions based on someone's opinion rather than the facts right in front of us.

Here's an old story that demonstrates how information can become dangerously disconnected from reality.

A baker saw this headline on a newspaper: "Economy headed for depression." Reacting to this information, he cut his flour order in half with the local miller. The miller was then compelled to reduce his wheat order from the nearby farmers. The farmers then cancelled their equipment orders with the local manufacturer, who promptly laid off hundreds of employees. These employees were now unable to afford to eat at the restaurants that purchased the baker's bread, causing orders for bread to crumble.

As our baker, now out of business, locked his shop for the last time, he happened to notice the paper where he had previously seen the gloomy headline. Looking closer, this time at the date, he saw that the newspaper was 70 years old.

Clearly, the U.S. economy has challenges ahead; but unlike the thresholds of other uncertain economic times upon which we've stood, there are also resilient elements and strong fundamentals in evidence today that can help us limit the damage. Perhaps more than at any other time, each one of us has the ability to contribute - positively or negatively - to whatever economic condition we experience this year. And the best way to make our influence positive is to be critical consumers of information, resulting in thoughts, words and behavior based on reality, not hyperbole.

For small business owners, it's not difficult to avoid the negative influence of availability cascade; just do your own research and come to your own conclusions about the real economic conditions in front of you. This could be as simple as recognizing that the stock market is not the economy and spending more time listening to customers and less time listening to talking heads.

Write this on a rock... If the real economy in front of you differs from the one the media sees, believe your own eyes and operate accordingly.

Jim Blasingame, small business expert and host of The Small Business Advocate Show
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