It's so much fun to disagree with Seth Godin. I spend so much time on his blog admiring his insights that it's very rare for me to disagree. But here's what he said about recession:
So, there's plenty of bad economic news floating around. From the price of oil to Wall Street to bailouts to the death of traditional advertising.
Which is great news for anyone hoping to grow or to make an impact.
Change (and the fortunes that go with it) is almost always made during the down part of the cycle. It might not be fun, but it's exciting. (Where do you think Google came from?) The opportunity is to find substantial opportunities (in any field) that deliver real value and have a future. Those jobs/investments/companies/ideas are undervalued right now, but not for long.
I definitely agree that there are plenty of opportunities, but here's my little quibble: the best opportunities are not during expansions or contractions, but during turning points. If you figured out that home prices would not grow to the sky two years ago (as my smart nephew did), you pocketed big money and sat immune to current problems. But think about the next upturn. All of the country's sales people will be discouraged. Their ranks will have been cut back, so the ones still on the job will be simply taking orders. They will be so discouraged that they won't be calling on new prospects. And then the economic turnaround will come. A small handful of sales people will call a prospect for the eighth or ninth time and find--they've got an order. The customer's previous vendor hadn't called recently, so why not give the business to the hungry young kid? And the hungry young kids of the country will clean up. When the turning point comes, the opportunities will be abundant for those who have been out hustling.
So I imagine Seth will say to me, "You and I don't disagree at all. It's the foundation laid in the recession that will lead to the great opportunities of at the turning point." The only problem is, I'd really like to find something to disagree with him about.
Let me take you one further, to suggest that the really big opportunities come at the secular turning points. For example, the HUI (Amex Gold Bugs Index) bottomed in November 2000, and has garnered returns exceeding 1000% since that time, even allowing for its recent pullback. The gains are even more dramatic when the HUI is contrasted to the S&P 500. Basically, general equities have been a poor investment since the turn of the millennium, as global inflation and Asian demand have driven the precious metal and commodity markets (which, unlike tech and housing are not bubbles). I'll grant you that different fundamentals drive the precious metal (monetary inflation) and commodity (Asian demand) markets. But these are secular turning points likely to last for a couple of decades or longer.
Posted by: Laurence Hunt | March 21, 2008 at 11:26 AM
You're both right. To be ready to take advantage of the inflection point, you need to do your preparatory work when the downturn starts. Spring always follows winter - start getting ready for the next boom now.
Posted by: That Software Guy | March 25, 2008 at 04:14 AM