Where we go from here: risk versus caution

We're all familiar with the scraps over who's to blame for our economic demise, dodgy bankers and the rest. But when it comes to how to move forward with an economic plan, other than giving the banks money, nobody is offering any answers. What it appears to come to is a fundamental question: should we engage in risk or caution now?

Arguably, most people favour caution. They're not spending much money, for one thing. And they're expecting further falls in the economy. Against that scenario, they reckon it's smart to shut up shop and wait til it all blows over before getting back in the game.

There are a minority who say that this is the time to engage in risk. Invest in startups and high tech sectors now to reap economic rewards down the line, they say. (Joe Drumgoole has espoused a variation of this view on Twitter.)

My initial reaction to this idea is scepticism. Who would have the magic key to the investment funds? What would they invest in? Why are high-tech startups more inherently deserving of investment than low-tech businesses? And even if a few of them did take off, what's to stop them simply outsourcing to cheaper countries once they reach the kind of scale that we need them to reach to deliver a return on (our) investment?

On the other hand, the risk agenda has merits. Because simply sitting back and doing nothing, with our heads in the sand, is arguably the worst thing to do. That guarantees an ever-declining level of industrial activity. That approach will arguably lead to even worse job losses and exchequer deficits than trying something out.

In a nutshell, is it better to try something and fail, than calculate you might fail and not try in the first place? The American answer is: yes. Enterprise is built on endeavour, initiative and hard work. Failure is part of all that.

But the Irish answer is: maybe not. Companies that fail in Ireland still, for some reason, have a stigma of shame attached to them. And in a culture that values buying a house in one's 20s and settling down early, risking it on an enterprise that might fail is frowned upon.

Comments

[Orlaith]

I think the culture here is changing, it has to out of economic necessity. Few people my age (late twenties) are settling down and while some of us can't afford mortgages we're happy to invest some of our hard earned dosh. It's true the investment landscape has changed, the risk element has shot up considerably.

I think the global banking crisis will also influence the way Irish people approach investing in the future - Irish financial stocks were always seen as the traditional safety net. Until recently however, more and more people were looking at healthy returns on investing in emerging markets like Brazil, Russia, India and China. But those stocks have also dropped value. Now I think the good money should go on healthcare stocks and Green tech/green energy start-ups. Obama's stimulus package, which has a particular focus on jobs creation in the green tech sector will encourage strong growth over the next few years. With regard to the risk attached to new start-ups - some of the best performing tech companies were borne out of the ashes of the dot.com bust.

[Yourtech]

Good comment, Orlaith, I agree with you 100 per cent.