Funny thing about confidence and the economic climate . . . and good to remember these days: The pendulum usually swings too far. When things are up, they seem more up than what they really are; and when things are down, they seem worse.

Reality is somewhere in between.

I like this reflection by Jeffrey Pfeffer of the Stanford Graduate School of Business in “The Crisis Facing Business: Succumbing to the Madness of the Crowd” on BNET:

“Business leaders should remember something else perhaps even more important: Even in the worst economic times, there are companies—and industries—that arise and grow and prosper. Remember the late 1970s and early 1980s, with a severe economic downturn and stagflation—the deadly combination of no growth and high inflation? Apple introduced the first PC in 1977. IBM launched its own PC in 1981. The Macintosh with its game-changing user interface launched in 1984. And those are just a few examples. IBM traces its history to the 1930s—yes, those 1930s. And although there was a technology crash beginning almost a decade ago, Google, begun at about the height of the dotcom mania, charged ahead through the ensuring bust and has thus far survived and prospered. Smart companies understand that the easiest time to gain on the competition is when that competition is in full retreat. Business leaders can’t control the macro-environment, so they shouldn’t try. Focus on your business, customers and business model, and provide the best value proposition. People are still going to eat, shop, drive and use energy in many ways, travel, invent, work and engage in financial transactions. There must be numerous opportunities to help them do all of this.”

What happens, though, is that the news pushes us farther down the swing, accelerates the confidence pendulum, so we exaggerate the down as well as the up. For example, a year ago a 10 percent increase in the needs of the local food bank wouldn’t have made the local paper; but last week it was on the front page. Why? Because its confirmation of trend. A year ago the closing of a local restaurant wouldn’t have been news, but today it is. Why? Same reason.

News values bunch up like ill-fitting clothes. Bad news is more likely to be news these days because of the flock behavior of headlines.

Things are really tough right now. But don’t swing the pendulum too far.

Tim BerryTim Berry

Tim Berry is the founder and chairman of Palo Alto Software and Follow him on Twitter @Timberry.