Why You Should Care about the Vibecession

Rarely does one chart explain so much. The graphic below from The Conference Board captures the powerful but perplexing psychology behind multiple phenomena ranging from the U.S. presidential election to enrollment decisions by parents in schools. The chart plots economic expectations from The Conference Board's quarterly survey of key business leaders around the world (how executives expect the economy to perform in the months ahead) versus actual economic conditions. 

In 2015, the two lines diverged, with confidence trailing actual performance until they converged during the depths of the pandemic. Somewhere in 2021, the lines diverge quite sharply returning to their pre-pandemic pattern. In short, this is what economics writer Kyla Scanlon calls a "a period of temporary vibe decline where economic data such as trade and industrial activity are relatively okayish." Scanlon's term for this situation is a "vibecession" where the key factor in the ssion is not the economy but the vibe, or how people feel about the economy. 

What makes this meaningful for us is that people tend to put off postponable luxury purchases when their economic mood turns ugly. For many parents, who otherwise might see an independent school education as desirable, even preferable, for their child, a less expensive alternative can become acceptable when they expect (or fear) hard times. 

To be fair, the Conference Board figure plots the expectations of CEO's, not average consumers, and there is some evidence that consumer confidence has risen slightly of late. But what we think the graph captures is the ambient vibe gap within which people make decisions. It is not at all a rational process—something that violates classical economic theory which assumes that participants in an economy are rational actors. Instead, it is deeply psychological and explains why so much rational marketing in education fails these days.