The US Economy And Entrepreneurship From A Technologist Perspective
For months the OODA C-Suite Report has underscored for our readers to expect a slowdown in the global economy. Many who track the explosion of government spending plus quantitative easing plus low interest rates came to similar conclusions, especially after the Russian attacks on Ukraine and the China Covid shutdowns. But it took evidence of higher than expected inflation before governments began to discuss this potential. Now many institutions and business leaders are openly discussing the potential for recession. World Bank president David Malpass is warning that “for many countries, recession will be hard to avoid.” Jamie Diamond of JP Morgan has warned not just of potential clouds on the horizon, but an “Economic Hurricane”. Elon Musk put things in a unique way, saying he has a “super bad feeling” about the economy.
Is the US in a recession? The way Jamie Dimon put it is “Who the hell knows!”
The way economists and government policy makers define the term recession means we will not know until economic data comes in and is evaluated and official pronouncements are made about lengthly, multi-quarter declines in the economy. Since recession is only declared months after markets shift, this is not necessarily the most important question for a CEO to be asking right now. What matters more is if your market is in a recession right now or if you anticipate your market will be in the future.
Your assessment of the environment of your market in the near future is especially important if you are building a new technology or creating a new line of business. It can be very hard to start something new in an environment where business spending is declining. But for those with vision and an executable strategy anything is possible. For those building new capabilities it can be inspiring to learn that many of the world’s greatest companies were started in economic downturns. A few of note include General Electric, IBM, General Motors, Disney, Microsoft, CNN, Apple, Netflix, Airbnb, Uber, Cloudera and FusionX.
With that in mind, the following are considerations the C-Suite and entrepreneurs when it comes to preparing to survive and thrive in an economic downturn:
- Your assessment of your market is far more important than the Fed’s assessment of whether or not the nation is in a recession. Therefore, form your own assessments of your market. Segment your market into logical components that allow you to evaluate likely demand for your product or service by market segment (the downturn will not effect all your market segments the same). This allows extreme fidelity in assessments and can help you when making critical resource decisions on what part of the markets to focus on.
- Carefully evaluate your spend. If you will need to make hard decisions regarding staffing it is better to do that earlier vice later.
- When building new capabilities, stay grounded in what customers will pay for now. But don’t just build for today. Also build for the near future and beyond. Form assessments on the future technology landscape and make sure this informs your build plan.
- Builders of new capabilities, whether entrepreneurs or C-suite leaders building a new line of business, should understand the observations of Amr Awadallah and Andy Grove above. This is the best time to build.
- Understand the cyber threat to your business is higher in a global economic downturn. Criminals operating in places where there is not the rule of law or where attacks against US companies are done with tacit approval (like China and Russia) will increase.
- Where ever possible, build resilience. It is hard enough in the best of times to prepare for the Black Swan events. By definition they are unpredictable. Now in an economic downturn, an unexpected event can be devastating. Resilience can mitigate some of that risk. Build this by conserving cash when possible, hardening cyber defenses, keeping good backups, doing scenario planning and conducing exercises with senior leadership.
- Now more than ever it will pay to stay informed. Be sure you are on distribution for the OODA Daily Pulse.
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