“My theory has always been, that if we are to dream, the flatteries of hope are as cheap, and pleasanter, than the gloom of despair.”— Thomas Jefferson
“I am in the world feeling my way to light ‘amid the encircling gloom.’— Mahatma Gandhi”
“Are We All Gonna Die” refers of course to businesses, not to meat folks like us where the answer is “… of course – how and when being the only unknowns.
Businesses die regularly, large and small. Some foreign businesses have existed for a thousand years or so. In comparatively youthful America, there are some serious elders as well, including:
- Baker’s Chocolate (1765)
- Ames, the tool company (1774)
- King Arthur Flour (1790)
- Dixon, the pencil company (1795)
- Jim Beam (1795)
Lots of bad stuff has happened since these businesses were founded yet they are still alive and well. How can this possibly be?
You will probably figure out immediately that each of these sells an important staple: chocolate, tools, flour, pencils, bourbon. Demand for such items will exist forever. A business focused on products like these can also last indefinitely unless mismanagement or misfortune of some kind cuts its potential life short.
Stability and long-term economic growth were also survival factors
America has been growing steadily and hugely over this period. Stability ruled, apart from the Revolution, Civil War, WWI, and WWII – which actually generated a great deal of economic growth after a few temporary setbacks. Business longevity was relatively available for most.
Then came 2020. Stability gone. Past gone. Future unknowable. Changes enormous. Black swan days. Good old easy-to-survive days are no more.
How can businesses possibly survive in such difficult times?
But look at the trend of bankruptcies among US businesses
US business bankruptcies in the chart below show a steady, major decline over the past 40 years. These years, with the exception of 2020, were relatively stable economic years. The prime rate line shows a steady, major decline as well. You might even think that these two factors are related.
If you shift the prime rate line maybe three years ahead (to the right), the correlation seems unmistakable. No surprise: rising rates lead to bankruptcy consequences with a roughly three-year lag.
Business failures by this high-level metric indicate that times so far are pretty good. Not only are we (businesses) not gonna die but we seem to be more than thriving in general. Except for a decreasing number of especially weak businesses.
So what are we worried about? As long as interest rates stay abnormally (or new-normally) low, even weaker businesses should be able to survive, if not thrive. All is well.
Or maybe not.
The past does not reliably predict the future
Trend lines of course contain an implicit assumption that the underlying business and economic conditions remain pretty much unchanged. Apart from a few bumps, this assumption was valid from 1980-2019.
Massive changes to nearly everything in 2020 completely invalidate this critical planning assumption. Things are not the same and will probably be very different for the unforeseeable future. Today, we have no reliable planning baseline.
Good news though: low/no interest rates are likely to remain
Higher interest rates drive bankruptcies upward, as the chart above plainly shows. This means that bankruptcies will stay at the current low levels to the extent that business failures are high-rate-driven.
The favorable interest rate situation does not appear to be going away soon (or so we may hope). If this were the only big driver of business failures, we would be in great shape.
But it is not.
The impact of COVID-related factors is just beginning to be widely and deeply felt. Just as there is a two-to-three year lag in the impact of interest rate increases, there is likely to be a similar lag as COVID impacts work their way through the business system.
COVID-related damage to businesses has just begun
We are now facing a real “are we all gonna die” situation. Conditions have changed, and will continue to change, so much that the past is no longer a reliable guide for managing what is coming. It is truly a new and very different business world. What worked in past is unlikely to work in future.
Like it or not, your business is going to change. Many businesses will hunker down into a reactive, we’ll-muddle-through-it-somehow, response. They will allow external changes to redefine their businesses and management practices.
Others will try out a number of new approaches to see what works. Too many of these, however, are likely to be peripheral to the main, business-as-usual/sort-of operations. As they say in France, good luck with that.
A very different approach is needed – unless your business is dangerously fragile.
Business fragility could be a killer
COVID-related damage has further weakened many already-weak businesses. For some of these, COVID impacts may be simply the proverbial last straw – ones already so fragile that nearly any serious stressor event will break them.
Fragility can be inadvertent or driven by mismanagement. Businesses that are not fragile are resilient under a wide range of negative situations and impacts.
Note that such businesses are not “antifragile” in the Taleb sense – those able to gain strength as a result of impacts, not just survive and recover.
[Next post addresses specifically the topic of business fragility.]
What are we dealing with at the moment?
Things for most of us are very difficult but there are a few hopeful signs beginning to emerge from the rubble. Here is what I see:
People have adapted amazingly well, all things considered, to a year (so far) of lockdowns, COVID-fear responses, small businesses failing, workplaces and schools going virtual, and many other nasties. Most of us are struggling but we are still here despite the best efforts of the current black swan flock to nail us. That’s a decent win, yes?
We read now that lockdowns and masks are going to continue at least forever, and probably longer. Same with virtual work and schooling. Okay, so what else can “they” throw at us? We are proving to be surprisingly adaptable, resourceful, and resilient. Who would have guessed this way back in the distant past of early 2020?
The real question is: when are things going to start improving.
Here it gets a bit tricky. Can we hope for “improving” back to the good old days (and the associated not-so-good old days)? Almost certainly not going to happen. The past good-old-days are gone, forever. So, when are some new good-old-days going to show up?
As I have argued in some previous posts (here, here, and here), what is coming along will definitely be “new” because the changes since early 2020 have been huge and devastating. Not much chance of going back so we are headed for a new normal, as they say. New for sure. Normal, not so much.
Human history is full of calamities, yet here we are
Stepping back a bit, it seems clear that there are some, and most often very many, survivors despite regular calamities. Why is that?
The answer is that people as a whole are pretty good at surviving no matter what happens. We, humanity and our businesses as a whole, have had a lot of practice.
The trick then is to manage things so as to be among the survivors, and even possibly among those who thrive as well.
Adaptability, agility, and creativity
Survivors and thrivers seem most likely to have these three capabilities. They face and deal with changes of almost any kind as being valuable sources of opportunity. Sun Tzu said this 2,500 or so years ago, so it must be true.
Times of stability may actually be bad news for such people. Zero or hard-to-find opportunity. A few hundred years ago, folks looking for opportunity headed for the Americas from largely stable European societies (apart from regular wars and plagues). Unfortunately, they found no stability across the water in general but instead a fertile ground for the adaptable, agile, and creative.
From this Sun Tzu viewpoint, we are really in some great times.
Changes – big changes – are everywhere and appearing regularly. Just what we are looking for. Assuming that we are looking.
The bad news that we read so much about today is really good news in disguise. For some of us at least. Including you?
Seeing the current situation as opportunity takes a very special sort of person. While there are probably not a bunch of these around, what they accomplish can make a huge difference in prospects for the large majority of us regular folks and businesses.
Quite a number of good writers today seem to focus mostly on the negatives, which are of course many. One of my favorite is Charles Hugh Smith, who nearly always has a highly intelligent and interesting take on the downside of things. One recent example: “What Collapsed The Middle Class?”.
The middle class may well be collapsing or collapsed but the formerly middle class folks have not simply disappeared. They are still out there eating, living in some fashion, and doing things that they find essential. In this respect, a collapsed middle class may represent a number of serious market opportunities.
Just what are these opportunities?
I surely don’t know, and probably most of us don’t know. But a few of the adaptable, agile, and creative among us are going to find out. Count on it.
We are not dinosaurs
Poor old dinosaurs, who ruled the world a few eons ago, had the misfortune to be around at Yucatan-asteroid time. That was the black swan of all black swans. For them only, however. Who benefited? A bunch of small running-around creatures who found enough food in the rubble to survive and eventually to thrive into us recent biped-mammal-types. Who says that bad news like an asteroid hit doesn’t present opportunities?
We – well, most of us anyway – are a lot smarter and more resourceful than the little furry four-footers that started things off post-asteroid. Today, we even have quantum computing that is surely good for something important.
Are you or your associates adaptable, agile, and creative?
These capabilities are not especially common, unfortunately. I have met many people over my years of meeting people. Just a few would realistically fit into the “adaptable, agile, and creative” category. Rare folks.
Why is this?
One of the characteristics that I have found in such rare people is a natural fearlessness. They seem to welcome challenges and new situations. They tend to be strongly forward-looking. Their past is always quickly over.
Another characteristic is an ability to see opportunity where most of us see either not much or mostly trouble. They tend to bubble with ideas, a few of which are actually practical.
They are also supremely confident in their abilities. Quite often this is fully justified. They are also natural leaders. They inspire others easily and effectively.
You get the idea. So where do you find such vital people?
My experience says that you don’t find them. They find you. They are usually entrepreneurs of one sort or another. They rarely exist inside larger organizations where mavericks and free thinkers are not team players nor compatible with hierarchy and structure. However …
Recruiting the unrecruitable
You have all heard of “skunk works”. They are special places created for special people – the kind we really need today. Wikipedia has a great definition:
“The skunk works name was taken from the moonshine factory in the comic strip Li’l Abner. The designation “skunk works” or “skunkworks” is widely used in business, engineering, and technical fields to describe a group within an organization given a high degree of autonomy and unhampered by bureaucracy, with the task of working on advanced or secret projects.”
These types of people are typically different from entrepreneurs who mostly do their own thing. Skunk works people are corporate-adaptable but don’t fit well into the main organization. The ones who are especially creative are candidates for skunk works projects.
You probably don’t want entrepreneurial types for your business. They tend not to last long. What you do want is a way to recruit and nurture a small number of free-thinkers who have exceptional abilities but are not good at being mainstream corporate.
An exercise for you: who are your potential skunk works folks?
Can you quickly list those in your organization who are especially capable and creative? I bet that you can. Now beside each name, list their current functions and positions.
In my experience, these kinds of people exist in nearly every organization but they are deeply buried and often seriously misassigned relative to their real abilities. And they are few.
Highly creative people are different
There is a real trick to recruiting and retaining especially creative employees. They are truly different and must be approached and treated as such. Ben Eubanks has these seven pointers (see Related Reading below):
- Prepare for creative tension
- Seek wanderers
- Test their big picture thinking
- Encourage some nonconformity
- Let people share and vote on ideas
- Don’t hire “idea” people if you don’t plan to use their ideas
- Don’t treat creatives just like everyone else”
This pretty much fits with my experience. Businesses that can’t or won’t deal effectively with creative people are going to have a tough time in coming days when only the most adaptable, agile, and creative people are not gonna die. This is a new world.
The future looks very bright if you are the kind of person who sees opportunities where others see pain and suffering. This kind of person is especially adaptable, agile, and creative. They are uncommon, hard to recruit, and hard to retain. But they are essential to survival and success in these difficult days.
Abhijit Bhaduri, Chief Learning Officer for IT giant Wipro, has this observation about nurturing creative employees: “How to nurture creativity among employees”:
“Creative people are a rare species in an organization. They are a strange breed. They are a minority. Unlike many other minority support groups, they don’t have anyone to speak up for them. Creative people do not always choose the performing arts or the media to build careers. In fact if anything at all, the ones who are doing the solo act or those whose career lies outside the grip of an organization does not face the same challenges that the creative people face within the organization. Organizations have a way of taking over the lives of people who work there. We all have the ability to be creative.”
“Here are a few things every organization can do to stoke back creativity:
1. Applaud the contributions of creative people.
2. Encourage divergent thinking with bouts of intense convergent thinking, through several stages as you solve problems
3. Give your employees time to daydream. Focus on just action will lead to predictable routine outcomes.
4. Ask them to solve real problems that the organizations are facing
5. Lead them like the conductor leads an orchestra
While creative people may be difficult to manage, yet they are the ones who take organizations to new heights. So nurture them or at least get out of their way.”
Berkshire Associates, a MD-based recruiting firm, has some suggestions about how to identify and recruit creative people: “How to Recruit and Hire Creative Employees”:
“In the business world, creativity plays as crucial a role as it does in the artistic world. Companies that lack creativity are less likely to be able to keep up with market changes, consumer preferences, competitor moves, or to maintain internal agility.”
“We pay attention to how the person approaches and analyzes the situations, takes into consideration the different stakeholders, the tradeoffs they propose, and their implementation plan.”
“Offer roles that require divergent thinking. No creative type is going to feel comfortable in a job that has no room for alternative solutions. If your organization offers rigid roles, expect to field candidates who operate best within a strict set of parameters. On the other hand, if your job openings call for an individual capable of examining a task from many angles or finding multiple solutions for one issue, those kinds of people are likely to apply.”
HR consultant Ben Eubanks in a recent blog post “7 Strategies for Hiring and Managing Creative Employees” had an interesting statistic on the great value of innovative people in business:“The research with entrepreneurs is especially noteworthy because it revealed the dramatic impact that this measure of innovativeness has on value creation. When those founders who scored highest on the Innovativeness Index were compared to those who scored lowest, the ventures of the high scorers averaged 34 times as much profit, 70 times as much revenue and employed 10 times as many people. They were also dramatically more likely to be one of the exceptionally high performers that investors call a “home run” (defined in this study as having achieved at least a million dollars in annual profits).”
“… seven opportunities to help with hiring and managing creative people:”
“1. Prepare for creative tension
2. Seek wanderers
3. Test their big picture thinking
4. Encourage some nonconformity
5. Let people share and vote on ideas
6. Don’t hire “idea” people if you don’t plan to use their ideas
7. Don’t treat creatives just like everyone else”