The person who invented the fax machine showed a wonderful mind at work. Not for the technology. But as a product of peering into the future, the fax machine was sublime.

By this I mean that before the telefacsimile could be invented, someone had to see the trends that would make it useful. Like the proliferation of small offices; a growing international communication; and declining cost of data transmission.

Put those trends together, and of course we would need a cheap document copier.  In hindsight, easy. Not so when divining the future.

We need a fax machine inventor now for economics. What is the future?

I hear more people discussing storm clouds. If they are not on the horizon, they are just (make that ju-u-u-st) out of sight.

Stormy Rosenberg

Here is the case for storm clouds. I quote the economist David Rosenberg of Toronto's Gluskin Sheff, who cites long term trends that favor an end to the economic expansion, including:

  • Peak in the auto and home purchasing cycles
  • Rising interest rates, including the ten year Treasury yield just reaching 3%, up from 2.06% in September.
  • A boom in mergers and acquisitions (a sign of a sudden decline in M&A)
  • Cycle-high consumer confidence
  • Decades-low savings rate

In the last several days, Rosenberg cites increasing stock market volatility (like 2008's, he says. Whoa!) and a decline in speculative single family housing starts.

Sharpen the pencil

A strong bearish case for the economy is useful for managers. We don't have to believe it all, but we sharpen our questions. It's not projecting disaster, but scenario planning.

So, for planning on the negative side, there are three areas where we could--with an optional sense of urgency-- be taking action:

Financing. Arrange for your company to have absolutely-available financing for the next three years. This is always recommended, by the way, but in recent years the huge increase in lending made it seem old fashioned. As if, "Hey, banks are dying to get my business. Why worry?" Remember, bank lending can dry up faster than Phoenix in July.  Secure your capital now.

Marketing. Have you planned a product line for hard times? It is axiomatic that consumers buy more canned goods in recessions, and even home builders reduce the size of homes they build. What about you? In B2C, most vendors should think "necessities" versus "splurges."  At the same time, some industries--candy makers and shoes--should get ready for new consumers, as small luxuries, like chocolate covered strawberries or a new pair of shoes, replace vacations and new cars. In B2B world, hard times are good for customer acquisition, even as weaker competitors just cut prices. Nothing appeals more to a buyer than a vendor who is confident in the future.

People. People decisions often take a back seat to business growth and marketing ambition. Retaining A players and coaching--maybe I should say 'coaxing'--the C players to do something different, well, these are hallmarks of companies in it for the long haul. Securing the best people will help you survive any downturn.

Recession leadership 

We have always survived economic downturns. But when you are in the middle of one, you can forget that. You can start to act out of fear--not getting out to see customers, or introducing an important product. People who feel set-upon can do all the wrong things in recessionary times--like cut marketing, people and improvement programs. That isn't leadership--it's an emotional response.

But real recession leadership is understanding that the cycle will turn, and that you have the power to stay on top when it does.

Published on: Apr 25, 2018