With a global pandemic on and much of the world in lockdown, there is currently a recession happening. I saw a headline recently that indicated a third of Americans didn't pay their rent this month.
Yes, that's quite bad. I don't know whether it's better or worse that it's such a sudden onset event. I don't recall anything like this in my lifetime. In my memory, recessions are typically slow, creeping events that gradually get worse.
I guess the Great Depression that began in 1929 was probably similarly sudden onset. The Roaring Twenties came to a screeching halt on Black Friday with the crash of the stock market, which had people jumping out of windows.
Somewhat ironically, the term Black Friday is typically used these days to mean the day after Thanksgiving in the US and the start of the Christmas shopping season. It's ironic because the "black" is a positive descriptor in that case and suggests it puts some businesses in the black for the year -- i.e. makes them finally profitable for the year.
But when I was growing up, before Hallow-Thanks-Mas shopping season ate the final quarter of the year, Black Friday was more generally understood to be that awful day in 1929 that marked the end of the Roaring Twenties and the beginning of the Great Depression. Or maybe that was just my personal perception.
My father was born in the 1920s and grew up during the Great Depression, so it had a strong formative impact on his life and, through him, on my life. I perhaps have read a bit more than usual about that era because of that connection as my father was old enough to be my grandfather, so most people my age did not have parents who grew up during that timeframe.
I recently saw a blurb from an essay by Paul Graham that suggested it doesn't really matter what the economic climate is when you start your business. He felt it was largely irrelevant to your success or failure.
This flies in the face of everything I have ever read. I have always read that, in some sense, depressions are a better time to start a business and that some of our strongest businesses were born during economic downturns.
It's easier to start a business during boom times, but that ease often undermines long-term survivability. As some culture somewhere says, "Calm seas do not make for skilled sailors."
I read a story once about two girls going door-to-door to sell pet rocks. The author of the story bought one, then afterwards as the girls walked away, the author overheard one of the girls say to the other something like "See, I told you. These fools will buy anything."
During boom times, almost any idiotic idea can make money if you just persist. But during recessions, your business needs to genuinely add value to survive.
So it's a climate with a much stronger signal-to-noise ratio because people simply can't afford to indulge cute little girls selling rocks as pets. Such silly efforts won't make it.
Growing up, I had the apparently common impression that everything was bad during the Great Depression. But the reality is that some businesses boomed during that time.
People couldn't afford cars, but they still needed to get to work. So bicycles were a growth industry.
Cash was tight, but people still had needs. Second-hand stores also did very well.
Women's clothing did take a hit, but not as much as you might think. They sold about eighty percent as much as during boom times.
Money was tight, but people still needed clothes. Margins weren't as fat, but there was still room to make money on clothes.
However, your business doesn't have to be born during a recession for its success to be born of a recession. This is the relatively little known story behind the John Deere tractor company.
During the Great Depression, farmers were defaulting on tractor payments right and left, so most tractor companies were repossessing tractors. But it was so widespread, they couldn't recoup their money.
Farmers weren't buying tractors and now the second-hand tractor market was experiencing a glut. So John Deere decided to not repossess tractors.
Instead, they told farmers "Times are hard now, but you are going to need your tractor. So keep your tractor, even if you can't make payments right now."
They mention the decision on the history page of their website, or did at one time. But the last time I looked, it was like maybe a couple of sentences and did not convey how important that decision was to the long-term success of the company.
I know about that angle because I read an article once by a guy who sold tractors for some other competitor many years after the depression ended. He said that if there was a John Deere tractor parked on the property, it was a waste of time to stop his car.
They were die-hard loyalists and could not be persuaded to try a competitor's product because the family farm was only still in the family because of John Deere. So although it was like the 1970s and it was their father or grandfather whom John Deere told "Keep your tractor," that family was never going to buy from anyone but John Deere.
I also once read the biography of J. R. Simplot. It was a good read.
He struck out on his own at age fourteen. His earliest business was born when he went around and asked farmers to give him their piglets rather than kill them. There was a glut on the market and farmers were simply killing the piglets rather than spend resources on feeding them.
He reasoned that since all farmers were killing piglets, in a few months there would be a shortage. He was right and he was basically the only guy in the area with pigs for sale when the market turned.
Meanwhile, he needed to find some means to keep them fed. He got creative and went hunting on BLM land to come up with meat for essentially free.
During the Great Depression, he sold dehydrated onions. Margins were extremely thin. He made about a dollar in profit for every train car worth of onions.
When he later got into selling frozen French fries, he made an absolute killing. He was an early adopter at a time when most restaurants made French fries in house from fresh potatoes, but this was creating a quality control issue for McDonald's and his company got the contract to resolve their issue. He ultimately ended up a billionaire.
If you are out of work currently, starting your own business may be your only real option. A lot of people are out of work and many companies have hiring freezes currently.
Take heart in the idea that bootstrapping your business during a recession is one of the better ways to grow a solid business that can weather a variety of business challenges. This is true precisely because it's a climate that tends to give quick and powerful feedback concerning what works and what doesn't.
You may also stick with it when you otherwise wouldn't have simply because you have no easily available alternatives. You may not be making much, but it's better than making nothing and it may effectively be the only game in town for your purposes.
This is precisely why I persisted with freelance writing while homeless. What little I was making was better than having no earned income.
There's been a lot of ink spilled on the subject of economic cycles and attempts to predict when the next recession will occur and what will trigger it. There's absolutely no doubt that real world events, such as Peak Oil and the current pandemic, are factors.
But the best explanation I ever heard for the ups and downs of economic cycles was that people get lazy during boom times until that laziness starts hurting their pocketbook. Then they work hard to reverse the negative impact on their bottom line.
When push comes to shove, the economy is about human effort to add value and pocket the difference. This is equally true in both good economic times and bad.