Anthony Hilton: Most firms seem optimistic about their own future. They can't all be exceptions


I'm not a great believer in business awards, having been a judge in too many to have kept faith in the integrity of the judging process. But if an exception can be made, it should be to recognise the justice in the fact that the annual report of WPP, the advertising and marketing services group, picks up gongs on a regular basis.

It gets the accolade because it looks good and is worth reading, as I was reminded earlier this week when browsing through the current version and finding an article by Jeremy Bullmore, one of the great figures in British advertising.

His subject was the placebo effect. In drug trials it is customary to give one half of a test group the new drug being trialled and have the rest of the group take a compound with no active ingredients and then plot the differences between the two. The problem is that those getting the worthless compound frequently report that they also feel better.

Wine tasting is similarly susceptible. Put some average stuff in a bottle and label it house plonk, put the rest in a bottle and label it as if from an expensive French château, and the test group will swear that the château wine is far superior.

Mr Bullmore's purpose was not to mock the people coming up with the duff answers, but rather to point out that they genuinely believed what they reported. His point is that through some complex process in our brains, perception influences reality. What people believe – whether it is true or false – influences the way they feel, what they believe and the way they behave without them knowing it. In the sample they did really feel better; they did prefer one wine over the other.

It set me thinking about a placebo effect in the economy. On Thursday I was in Newcastle addressing the local Entrepreneurs forum – a brilliant organisation which provides mentoring advice and support for several hundred local entrepreneurs determined to lead the revival of the North-east as a business hub. What you find talking to groups like that, or reading surveys of sentiment in medium-sized firms up and down the country, is that they mostly report that they are doing all right. But ask them about future prospects, and the mood immediately darkens. They are far more optimistic about their own business than about the economy as a whole. All the stuff which hits them daily about the euro and double-dip recessions makes them think they must be an exception.

So we need to worry about the placebo effect in business – that perception will again become reality. If everyone is exposed to a remorseless diet of gloom – whether or not it is true – it will change their behaviour. Even if their own business is doing well they will lose confidence, and gradually fall victim to the downturn themselves.

Inspirational leadership has a role to play here. Cameron and Osborne lose no opportunity to tell us how brave they are in seeking to impose austerity on everyone. They would do a lot more good if they started dispensing hope – talking about the glass being half full rather than half empty and giving us a vision of how and when things are likely to improve. If they don't believe, how can they expect anyone else to?

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