The Return of the "Feel-Good Factor"

(Business 2.0 Magazine) -- That 2007 was a great year for the majority of Americans is hard to deny. Every pollster's measure of our well-being - consumer confidence, household spending, how many think the country is "on the right track" - took a sharp turn upward this year. But ask why this turnaround happened and you'll get different responses from an economist, an environmentalist, and a business consultant. No one can point to a single eureka moment, but it boils down to this: People were ready for a change of mood.

Of course, a large part of what made 2007 great was what did not happen. The Middle East remained tense but didn't blow up into a wider war. There was no global oil crisis. (The price per barrel, which hit a high of $80 in August 2006, settled down at a respectable $60.) Inflation was kept in check. The dollar did not collapse. The real estate bubble deflated, to be sure, but it didn't burst - and with interest rates stable at 6 percent, it looks set to start reinflating in 2008.

And our present positive mood is possible only because of the sustained strength of the U.S. economy. When the Dow Jones industrials shattered the 12,000 barrier for the first time, in October 2006, it was because traders anticipated a profitable year ahead - and as it turned out, the wisdom of the crowd was right again. The insatiable demand for goods among China's and India's burgeoning middle class, combined with relentless innovation, sustained the engine of growth so much that the economy grew at a healthy 3.5 percent - and the Dow is threatening to break 14,000 in the new year.

This past year was a good time to be green. If Al Gore likes it, traders began joking, you'd better invest in it. The economists who warned that climate change would be a big drag on growth had it backward - while the true trauma of shifting weather patterns won't kick in for a few more decades, the business opportunities are emerging now. Case in point: California's climate-change legislation. Demand for solar panels for nearly every commercial or government building in the state pushed the panel makers' production capacity to its limit. And everyone, it seems, wants a greener car: The average waiting time for a hybrid is up to six months.

It was also the year of the post-TV generation. The kids who grew up with downloads rather than broadcasts are starting to reshape the media market in their own image. When Google paid $1.65 billion for YouTube last year, the price tag raised eyebrows; when it signed deals with the networks, which agreed to funnel content to the site in bite-size chunks, the acquisition seemed like a bargain. By the end of the year, just about any content that consumers could think of was available in any downloadable format they wanted.

The dizzying choice in all markets also drove innovation. Faced with endless questions - Gas or ethanol? Camera phone or videophone? HD-DVD or Blu-Ray? Nintendo Wii or PlayStation 3? - confused customers turned in droves to a new world of consumer blogs. Thanks to user reviews, the most visited soon became the most trusted, and such sites are now the fastest-growing segment of the blogosphere.

The only thing growing faster is the new sport of competitive philanthropy. Bill Gates and Warren Buffett showed the way in 2006; this year Google.org, Pierre Omidyar's network, Richard Branson and his Elders, and Marc Benioff's "compassionate capitalism" all saw double-digit growth in their endowments, as the billionaires' club brought the same entrepreneurial zeal to giving away money that they brought to making it. And that - for the poorest, neediest parts of the world that missed out on the 2007 boom - should make 2008 a very good year indeed.

Peter Schwartz is chairman of Global Business Network, a consultancy that does scenario planning for Fortune 500 companies.