Apparently I have become a defacto expert on weathering tough times. Maybe it’s because I was at the detonation point of the Internet Bust (boy, was it crowded there!). Maybe it’s because I have broad experience in running businesses amidst adverse corporate conditions (euphemism) and maybe it’s because I have lots of opinions. You decide. Regardless… This post is a summary of what I’ve been telling those who ask.

Markets are rough. Those of us who have personal experience with the Internet Bust know what it feels like to have opportunities and options melt away for an extended time. For those who haven’t been through this before, I caution you: don’t underestimate the impact.

The optimist will say that we are going to rebound in x period of time. The pessimist says it’s time to panic – stuffing cash and gold in the mattress. The realist takes an alternate view – considers the facts and reconstructs an approach that both covers the downside and allows for flexibility to take advantage of the new, unforseen opportunities that will surface.

HOW BAD IS IT?

World markets are said to be in the worst state since the Great Depression. I don’t think so. It may be worse than that. In the 1870’s there was a fundamental failure of the European banking system and it resulted in a global depression. The Great Depression of the 1930’s was primarily about the stock market. This crisis is more fundamental to the structure of our world’s economic system than that. Think of it this way: not everyone holds stocks, but everyone needs money. Additionally, this is intensely global. There were reverberations around the world for more than 20 years when European markets failed. In fact, the resulting US crash took place in 1893 – The Panic of 1893. How much more efficiently are the echoes reflecting in Europe and Asia right now?

So, the facts are that 1) we have a fundamental failure in the basis of our world economic system 2) Indicators are that it’s going to be a while before we experience a sustained, system-wide recovery. I don’t think it will be 20 years but we should expect to feel the effects of this for some time to come.

WHAT DOES THIS MEAN FOR ME?

All of the rules are changing. For consumers, for entrepreneurs, for investors and for executives. We all need to recalibrate our thoughts, plans, expectations and hopes to adjust for the turbulent time ahead. At the center of this is the concept is zero-base thinking. As Brian Tracy puts it: “How would I do things differently knowing what I know now?” In my words, tear everything down. Go back to the most fundamental facts and rebuild your plans from there.

So, to be concrete – Now is the time to step off the fear treadmill, or alternately, wake up from your denial about the situation, and rebuild your personal and professional plans based on the new facts in the world. Plan for sustainability through uncertainty. If you do this well, this time of change can be an exhilarating and empowering, albeit challenging time. The cost of retaining existing plans and approaches without examining them is most certainly disastrous. Not only will the next few years give your financial and professional lives a beating, but frankly, it will suck.

WHAT DO WE KNOW NOW?

- Credit – borrowed money in all forms -  is hard to get, and it will be for some time.

- Spending is slowing across the board, so income is tougher to get. For everyone.

- There’s no escape. No company or economy in the world is uniquely resistant.

- It’s going to take a while to sort out.

WHAT TO DO NOW?

There is a lot of commentary on this. It’s worth boiling it down. The foundational principle is to set your baseline plan for the worst and then prepare for opportunity. The high points of a successful path for weathering this uncertainty is the same for individuals and companies:

Set a long term plan!

1) Get spending to a sustainable point with current resources. Do this at all costs. Redefine strategy, give up luxuries and optional activities… whatever it takes.

2) CASH! Get and stay liquid – both to draw on reserves if needed (unexpected costs or reduction of resources… e.g. loss of job or customer) and to take advantage of opportunities as they appear. If you can carry your debt comfortably, let it ride. Within reason. Hang on to your cash if you can. (note: I am not a financial planner! Use experts!)

3) Reassess frequently. Everything is changing, nearly daily. Stay on top of the resource -to- rate of consumption equation.

4) Invest conservatively. We are in a macro cycle of uncertainty. There will be ups and downs, however only those with impossibly great insight and timely information are equipped to play in that game. For example, I jumped in too soon after the Bust and lost the majority of what I had so carefully protected. (again: I am not a financial planner! Use experts!)

DOOM AND GLOOM?

Not at all. Once we adjust our consumption (personal or company) to match our available resources we can let go of the emotions inherent in uncertainty. Fear can give way to cautious confidence. Once realigned to today’s realities, we can begin to take advantage of them.

Time will tell the extent and duration of this downturn. If, as history suggests, it takes a while there’s still reason for optimism and opportunity-seeking.

Success will lie in the ability to adapt rapidly to the emerging reality. Strategies for investing, borrowing and growing companies may or may not change in their entirety. If you bet that they won’t, you’re going to miss the inevitable opportunity that emerges from the portion that does change.

And that’s where the action is.

As it stands today, I see opportunity in building sustainability into our businesses and personal finances. After the election, regardless who wins, I see opportunity in helping to sort out the country’s energy dependence problems, in helping to continue the process of making the web more socially satisfying and in helping to unlock the spark of innovation and passion in the emerging entrepreneur.

That’s where I am putting my attention at this moment.

If you want to go deeper into the implications of this for early stage companies, check out John Borthwick’s brilliantly insightful and far more detailed post. http://bit.ly/49SLlg

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