Archive for the ‘start-up’ Category

Follow-up on Recessions

June 16, 2010

I previously wrote a blog post about how recessions could be good things. In this article I elaborate on these thoughts and add concrete examples of how entrepreneurs use recessions to their advantage.  Hopefully this can inspire you to think about how you can turn bad economic times into new and exciting opportunities to grow.


How Can Recessions be Good Things?

May 17, 2010

Recessions suck.  And this recession has been more painful than most:  food banks are depleted, children go to bed hungry and opportunities for advancement are put on hold, if not thrown in complete reverse.   But I’m going to make a counter-intuitive observation today:  that recessions have a significant upside to them, and for those fortunate enough to get ahead of the curve, they can be quite profitable.

For instance, this downturn started just as I was leaving grad school in December 2007.  At the time I couldn’t buy a job, and I found myself in a very precarious financial position.  Growing increasingly frustrated, I began attending networking events across the Southland, at which point I met real, honest-to-goodness entrepreneurs.  These people had taken an idea, brought it to life and sold the resulting firm for hundreds of millions of dollars.   For example, I met the guy who founded Ethos water and sold it to Starbucks, as well as the fellow who founded Atari and, later, Chuck e Cheese.  These folks were truly incredible.

Ever curious, I began looking for trends in their behavior.  One trait they shared was boundless optimism in general, and genuine excitement about this recession in particular.  This baffled and insulted me:  millions are suffering, and these people are excited?  “It’s easy for them to say,” I sniffed, “they are already rich and don’t have to worry about losing everything they own.  How cold-hearted can these people be?”

And then, just a few weeks ago, it made sense to me.  I attended a presentation on cloud computing where one speaker showed a very interesting trend:  every recession saw a correlating boost in technological innovation, thus opening opportunities that were not there before. 

But why do mass innovations happen during downturns?  For one thing, innovation isn’t required during good times because, well, times are good:  firms are hiring, people have jobs and all is well with the world.  But when bad times hit, people become increasingly innovative to avoid homelessness and hunger.  At the same time, firms are looking for ways to increase operational output with less money, allowing these entrepreneurs to sell their goods and/or services to willing firms. 

In a nutshell, recessions seem to spark opportunities, even as millions are hurt.   There’s obviously a lot more to this; what are your thoughts?