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#16: People Don't Lose Value in a Crash
The recession is here. Some of you are getting called back into the office. Maybe you are being asked a few more probing questions about how you spend your working hours. Some of you may be laid off (probably not if you work in HR though lol).
The Good Times, are, perhaps, over.
You could respond to that one of two ways.
You could crawl back into the cubicle, clip on your Pride lanyard, and try to keep your head down for the next three years (or five, or ten) while you wait for this thing to blow over. Just hope that your PowerPoints continue to justify your salary, that inflation doesn’t eat it all, that nobody asks you a pointed question in a Zoom diversity training. And then, when things finally get better, maybe you crawl out — three or five or ten years older — and try to make something happen.
Or, you could get lean, get flexible, and figure out how a down economy might accelerate your plans instead of deferring them.
This week in the EXIT full-group call, we talked about the opportunities created by a recession, and what it takes to seize them.
For starters, big globocorps aren’t the only ones who can take advantage of slack in labor markets. Millions of smart people are about to become a lot less comfortable. If you have vision and a business model capable of generating revenue, you’ll have access to talent that you couldn’t remotely afford during the boom.
The recession in 2008 nuked many established small businesses because they had built up capacity (and taken on debt) to serve customers who suddenly weren’t around anymore. But that same phenomenon amounted to a fire sale for entrepreneurs looking to start up something new. Customers changed their spending habits, but they didn’t stop needing things and buying things.
On the call, one of our guys described his experience of starting a business right as the bubble began to pop: “I wasn’t watching the news; I didn’t have time. I was trying to build a business.”
He that observeth the wind shall not sow; and he that regardeth the clouds shall not reap.
He hedged a bit, admitting that he was selling medicines, so his business was somewhat recession-proof — but it’s not like getting into a recession-proof industry is cheating. What could you sell that people are still going to buy?
To take advantage of these opportunities, you do have to stay solvent.
I’m not a fan of Dave Ramsay’s budget obsession— if you’re a reasonably responsible person, it’s a lot easier to earn 25% more than to spend 25% less. But one entrepreneurship coach in the group has shared a strategy he calls “the burger flipper budget”, which basically means considering how deep you can cut your living expenses in order to create the money and time that you need to start a business and get out of your job.
Imagine you’re in prison, and you’ve chiseled a hole in the wall, but it’s not quite wide enough for you to squeeze through yet. The burger-flipper budget is a way of asking yourself, “how lean could I make myself to get out of here?”
Which is another way of asking yourself, “how bad do I want to get out of here?”
The beauty of this approach is that you don’t have to have your brilliant business model figured out to get started — you just have to want to get out. Besides which, a recession clarifies things: you’re going to have to tighten up anyway, just like everyone else in the cubicle farm. But most of them will just take their sub-inflation annual “raise” for the next few years, maybe float a couple credit cards — and when it’s all over everything will be the same for them, only a little bit worse.
While you’re building your runway, how do you protect it? Safe stores of value are hard to find. Real estate is uncertain, dollars are uncertain, crypto is extremely uncertain; a couple of our guys mentioned commodities, which are very high, and expected to stay high — but that’s effectively a way to cut your losses, a mattress to stuff your money under.
But people don’t lose value in a crash.
Whatever comes next, investments in human capital will pay off — both in terms of your own skills, and the breadth of your personal network. Set aside budget to learn marketable skills. Surround yourself with mentors and advisors who can clarify your ambitions, steer you away from the shoals, introduce you to high-quality talent, and help you to spot opportunities.
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