I’ve just finished reading “The Recession-Proof Business” by Victor Cheng. That book deserves a more in-depth review in the near future, but already I wanted to share two pieces with you. Why? Because it offers perspective and hope to people and businesses in a recession.

News are about getting clicks, and that means they focus on the negative, on what is being lost. So it’s always doom and gloom and tomorrow the econony will crash and burn and we’ll literally be eaten by zombies alive while not even having finished our last margarita and also what’s the Fed doing anyway???

The issue is: it doesn’t help you make the best of a bad situation, does it?

So, I thought that book by Victor Cheng has something very useful to add to that discussion. Anyway, let’s go.

The economy goes down … but it’s still huge

Point number 1:

In many recessions, GDP shrinks … but the economy is still huge.

Obvious, right? But it’s good to remind ourselves: in many cases recessions are fairly mild. And in any case we’re not going back to the stone age.

Let’s look at a bad recession, the Great Recession in the US. GDP dropped about 4% from a high of $15.79 bn in Q2 2008 to a low of $15.16 bn in Q2 2009 before it started growing again. (That’s Real GDP in 2012 dollars, as reported by the St. Louis Fed.)

That means at any time the US produced $15 bn worth of output. (Now, was this money distributed somewhat evenly, somewhat fairly? Or did inequality get worse? That’s a different but also very good question.)

All this money going around means that someone still made money. Which brings us to the 2nd point.

Recessions are times of shifting demand

That’s the bit that I found so refreshing:

During a recession, as money tightens, people and companies change their habits and start buying and doing different things.

The book was published before the pandemic, but 2020 offered a striking example of exactly this: with lockdowns ongoing, GDP dropped massively. If you were a brick-and-mortar retailer you likely have suffered massively from this drop in demand. But if you were an online retailer and maybe selling household appliances (to people who suddenly worked at home) you might have made a fortune!

All recessions are like that in that behavior changes. Examples for more general trends:

  • people might not pick up that premium chocolate anymore—but go for the budget version instead
  • they might buy fewer brand new cars—and have their existing car repaired
  • companies might slim down their budgets—and invest in automation for more efficient operations.

In other words:

During a recession, demand changes. And that change means new opportunities.

The news love to cry over spilt milk—by for example exclusively focusing on the 4% that’s lost. But we’ve got to do something—so we better start figuring out where the remaining 95.7% went. For that reason alone, The Recession-Proof Business is worth a read. Review coming up soon!

(And if you want to read a fun, very short book about this change of mindset I recommend “Who Moved My Cheese?” by Spencer Johnson, M.D.)