In any capitalistic society, positive and negative business cycles will occur….it is inevitable. Since our Independence in 1776, there have been nearly 50 recessions. It is highly likely that the United States will experience more recessions, some even worse than what we just experienced.
What got us here was excess, specifically, owning homes we could not afford to own, and then owning a second home, when we had no business owning the first. Abundance of credit combined with lack of discipline, resulted in a spiraling downward domino effect through the economic food chain.
Where is the good in all this? Here are some of the positive results stemming from a recession:
- Weeds out the excess. Circuit City gave way to Best Buy, Netflix (NASDAQ: $118) has reigned over Blockbuster (Pink Sheets: $0.16), GM has abandoned the Pontiac and Saturn brands, to name a few examples. There is an intersection in Atlanta that has Starbucks, Caribou and Dunkin Donuts all represented……the weakest of the three will be gone before year end. Weaker companies giving way to stronger ones is in the benefit of the consumer long term.
- Increases efficiency in companies. Job creep. That is the simplest way to explain how positions get added to companies in times of growth and expansion and then when the cycle shifts those are the first jobs to become redundant. In my last position, there were 5 layers between the customer and the President of the Division; I was the 5th layer, the most expensive and the easiest to cross off the organizational chart. Even though I was impacted, it was the right call and with sales shrinking, there were no consequences for the customer or the company.
- Improves customer service. Attitudes are reset. When the economy is growing, the customer base grows as well, and we have a strong tendency to take the customer for granted. After all, there are so many and if we lose one, we’ll replace it with another. A recession takes us back to appreciating the customer once again, a critical component to a booming economy.