If you’ve been following the headlines lately, there’s a growing uneasiness being felt among many. I have certainly encountered some of this in a few recent client meetings. This general sense of fear stems from a whole host of issues: fear of another terrorist attack, the election, and an overall feeling that things are coming apart here at home and abroad. Moreover, I would venture to say one of the greatest unspoken fears today is the economy. You see, there are still many people in this country who have not yet fully recovered from the financial crisis of 2008. Furthermore, there are large segments of the population who might have recovered financially but are still recovering from the psychological and emotional toll of the financial crisis. I personally knew several people who not only lost their homes and jobs but also had their lives turned completely upside down. It has been devastating for many middle-aged people nearing retirement, to have a lifetime of hard work and savings evaporate overnight. How does anyone begin the process of putting the pieces back together after going through something like that?
I completely understand these fears. I have certainly experienced my share of financial hardship throughout my adult life, however, one lesson that stands out to me is this:
You see, when we’re in panic mode our survival instinct takes over. Naturally, as human beings, we are preconditioned to hunker down and look for ways to tighten our belts. Consequently, businesses begin slashing expenses, laying off people, and delaying future plans for expansion. Despite that, through all of the empirical evidence of previous economic downturns, the one thing that stands out are the courageous companies, who invest counter to prevailing beliefs, are the ones who are poised to profit the most.
We have all lived through the horrific events of the last decade, the tech bubble, 9/11, the wars in Iraq and Afghanistan, and the housing crisis. Each of those events by itself would be considered a once in a generation catastrophic event. However, each one occurred within a span of fewer than ten years. Despite all of that, there have been companies quietly working away at revolutionizing their industry. Apple sought to take advantage of an emerging MP3 technology for playing music by introducing the IPod. EBay was instrumental in inspiring peoples’ confidence to shop online by creating a feedback system and partnering early on with PayPal. And, Uber turned the taxi industry on its head by introducing the concept of ridesharing. These are a few of the many examples of companies who profited immensely during turbulent times.
“HOW DO I PROFIT IN TIMES OF GREAT UNCERTAINTY?”
I teach my clients not to view external events as something to fear. Instead, I teach them to think deeply and strategically. We start out the process by asking questions like if “x” were to occur, then “y outcomes” are likely to occur. Our objective is to steer away from rushing to judgment by concluding that the only possible outcomes are of either sort. Instead, we train ourselves to stretch the imagination by exploring the entire range of possible outcomes. This process is called “game theory”.
Game theory is an important analytical tool we can use to help better understand the environment around us. Once, we’ve explored the range of outcomes, we’re in a better position to formulate our responses, and better yet identify lanes of opportunity. This method of thinking will enhance your ability to properly filter information that you are receiving. For instance, there was a recent rash of bombings that took place in the New York and New Jersey area. Your first reaction as an entrepreneur should be, as a result of these recent terrorist attacks will there be any changes to market forces? Secondly, will consumer buying habits change? Third, is this a temporary event or part of a long-term trend? Finally, try to relate how your individual business or industry may be in some way impacted by the terrorist attacks?
This is an iterative process that must be done on a continuous basis so that it becomes a part of your everyday thinking. Essentially, the more you practice this process whether it is a natural disaster, civil unrest, or an unexpected economic shock you’ll instinctually gain a better understanding of the underlying market forces shaping the event. And, ultimately you will position your company to being at the forefront of providing any possible market-based solutions. This will be your strategic weapon to going on the offensive of ASCENDING your business through turbulent times.
Tell us what you think?
William E. Rogers, MBA, CFP, EA
ASCEND Business Advisory
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