What the Market Crash Taught Me About Tech

At best, technology can help us do things faster, but it doesn't do a good job predicting things or even helping managers make decisions

By Gene Marks

O.K., so the market crashed, and we're in a recession. There's also some good news to go around. Warren Buffett's buying. The elections are finally over. The Phillies won the World Series. I've got a year's supply of Halloween candy pilfered from my kids.

The Wall Street crisis has also taught me a great deal about technology.

For years I've listened to software companies tell us that, with technology, our decision-making will be made easier. And we'll be making better decisions. We'll have better facts. We'll be able to do better analysis—in small businesses, large enterprises, and financial-services firms.

And yet, the markets still crashed despite all this cutting-edge magical stuff. Where were the alerts? The safeguards? Those special programs and whiz-bang tools that so many tech companies promised? It didn't do much for Bear Stearns, Merrill Lynch (BAC), and AIG (AIG). Those guys had a lot of great and expensive technology, but they still tanked.

This financial crash has taught me that even the best technology doesn't do a very good job predicting anything—or even helping business owners and managers make decisions. At best, technology can help us do something faster. But we are a long way off from artificial intelligence. So, the next time some software sales guy tries to tell me that his business application will do anything more than increase productivity, I'll be hard-pressed to believe it.

Beware of Automation

I've learned that too much automation can really be a bad thing. Behind these wild fluctuations in the Dow Jones industrial average are thousands of systems launching automatic sell and buy orders based on some (mostly wrong) analysis and assumptions. This is happening on a grand scale. When things are consistent and predictable, that may work fine. But when are things consistent and predictable—especially in a small business?

My company sells software that has built-in automated workflow programming, allowing for certain things to happen automatically if certain other conditions are (or aren't) met. But only a small percentage of our clients use it. Why? Because the data's got to be right and consistent for the automation to really mean something. In the markets, the data wasn't right. Yet, Apple (AAPL) didn't lose 40% of its value in a matter of days because of bad data. There were fear and other emotions. Technology can't take these things into consideration. If there were less automation and a little more rational human decision-making, maybe some of these issues could have been avoided on Wall Street. Well, they weren't. But that doesn't mean I have to suffer the same consequence in my business, too.

Here's another thing I've learned. There are just some times when no one has a freaking clue. Not the experts, the pundits, the consultants, the CEOs, the boards of directors, the media, the President. That includes the Fed and the Treasury. Everyone's trying. But they don't really know what's going on. Same goes for those experts who tell me to purchase a certain type of backup system for my computers, or those geniuses who swear I'll save thousands of dollars by investing in their inventory management system. They really don't know, either.

No one really knows what technology is best for my business or what really works well. I need to rely on my gut more and the experts less.

The financial malaise also shows that when you don't understand something, you shouldn't buy it. I'm happy to admit that I was never intelligent enough to fully understand the whole subprime-medium-rare-mortgage-backed-securities-with-a-side-of-potatoes products. Unfortunately, there were many others who should have understood them but were equally clueless.

Missing the Party

So I'm not going to purchase technology unless I really, really get it. I'm not going to rely on others assuring me that something works. I'm going to want to see it work, and test it, and make sure I'm comfortable with it before I jump into it. If I'm keeping key data on some other company's servers—jumping on the cloud computing bandwagon—I'm going to make darn sure I know exactly what cloud we're talking about. If I'm relying on some complicated bit of security firewall, then I'm going to understand exactly what it does (and does not) do.

And just because everybody's doing it, that doesn't mean I should do it. For years the rage has been stocks and markets and the Dow, and everyone's buying, buying, buying, and I'm an idiot if I'm not participating. The same goes for technology. Each week there's another new thing: software sold as a service (SaaS), cloud computing, Linux, Speech to Text, virtualization, Web 2.0, mobile computing, you name it. Sometimes I feel like just because I'm not doing any of these things I'm missing out on the party. Well, the financial mess we're in right now has taught me that maybe it's not always a great thing to be in the party. I'll use the technology that I need, and I'm O.K. if some twentysomething kid makes fun of me because I'm only using Ajax to clean my sink and shower.

Finally, the stock market crash has taught me definitely not to put all of my eggs in one basket. I'm wary of using one vendor for all of my technology. I'm wary of some critical custom application written especially for my company that's only supported by the one goofy dude who wrote it. I'm concerned about the IT support company that made me commit to a maintenance contract for my network but sometimes doesn't pick up the phone. I need multiple systems, multiple providers. I need backup processes and a plan for when that supposedly reliable vendor disappears into the night—like half of my savings.

Gene Marks, CPA, is the owner of the Marks Group, which sells customer relationship, service, and financial management tools to small and midsize businesses. Marks is the author of four best-selling small business books and writes the popular "Penny Pincher's Almanac" syndicated column. He frequently speaks to business groups on penny-pinching topics. More penny-pinching advice from Marks can be found at www.quickerbetterwiser.com.