An open letter for entrepreneurs, business owners, CEOs, Presidents, and Key Executives,
I have been thinking of you, your business, and your employees, and I am wondering how you are doing? How are you holding up? How is your business holding up? How is the morale of your team? Are you preparing for what’s likely next? If Peter Drucker were here today he would tell you… “Your first and foremost job as a leader is to take charge of your own energy and then help to orchestrate the energy of those around you.”
While you are in the think of the battle with your company in this Covid19 challenging environment, I want to be a coaching resource, sounding board, and engaging thought channel for you to check into as you have time and interest. This email will be the first of several I intend to put together and share during this crisis, with a goal of providing lift, wisdom, and plain-speaking leadership actions that you might want to consider at this time.
This morning it was announced that another 6.6 million employee jobless claims were filed for unemployment relief, bringing the 3 week total to 16 million (reflecting 10% fo the workforce); and unfortunately this will not be the last increase in this number. On March 30, 2020, the St Lous Federal Reserve bank forecasted that it was possible that 47 million people could lose their jobs reflecting 32.1% of the work force [1], indicating that some 67 million Americans were working in jobs that were vulnerable to layoffs. it was a stark reminder of how challenging this economic environment is for many so far, and that we are still trudging through this economic and health crisis looking through the glass darkly with no clear view of the future.
It is likely that future unemployment will land somewhere between the 20% to 32.1% from peak to trough, and the depths thereof will depend on how we as businesses leaders and the nations leaders navigate out of this crisis. If we look to past pandemics, the 1918 Spanish Flu Pandemic negatively impacted the market for seven months, before the market bottom was reached and the economic came back strong into the age of the Roaring 20s. From economic research we find that typical economic recessions last 8 to 14 months. The Great Depression had two waves, and the first wave lasted from August 1929 (the market peak), crashed in September 1929, and did not complete its cycle until March 1933. So if the past is any guide, we are looking at 7 months to four years if its like most market shocks. This means you need to be thinking about a new normal, and not waiting for the old normal to return, or you might find yourself flat-footed and unprepared for what’s next.
In many ways, this Covid19 pandemic is different than past times. The 1918 population had the advantage (or disadvantage) of poor communications, no internet, and the public was largely dependent on what they heard from a few sources. Medical discoveries were light years behind where we are today. However there are important differences that negatively impact us today, that were not the same issue 100 years ago. Today is widely different, as there are many sources, good and bad, positive and negative, legitimate and fake, and there are followers of each voice. In the Great Depression, it would be 13 months before the financial depression was felt in Idaho; not so today. The faster news availability creates a rapidly actionable news cycle and a number of companies moved extremely quickly to lay off staff, and ‘right’ size to their current demand. Further, our government leaders learned during the Great Recession that doling out aid slowly, or a program of the week, only forestalled the return to normalcy, and they are much more aggressive seeking to interview earlier, and this is positive news.
Some of my friends know that in addition to my being an executive coach, I am also an economist… whatever that means. In 2009 I published a book about economic crises and downturns and I spent a good deal of time researching about their recovery paths. I had the time to write that book because of another crisis, the Great Recession. In September 2008, the market crashed when Lehman Brothers declared bankruptcy, and my business that operated on tax free municipal bond based construction experienced an -86% contraction and freeze up in one week, with half of my company contracts never to return. I learned some lessons from my own experience and researching market downturns for my book, and I’d like to share a few insights with you. As an economist and executive coach, I want you to have your eyes wide open though it is painful. You must deal with the hard realities of your own data, your customers and their customers health, your employees and your own morale and physical health; and move forward preserving your capital for a longer period of downturn than the politicians might have you consider.
While the stock market toys with market animal spirits moved by politicians and pundits seeking to prop up the market with thoughts that this situation is over soon; I believe that we have not seen the market bottom yet. All the bad news has not been reported, nor have companies calculated the impact of the consumer economy losses on their total business demand. The economy is likely not to return to its former state of sustained bull market until there is a viable vaccine produced for Covid19 that can be widely distributed… and this unfortunately is not forecasted until fall of 2021 at the earliest; see the interview by Bill Gates this morning on CNBC.[2]. Further, a study produced by Imperial College (UK) forecasted multiple likely repeat waves of Covid19 that we may expect to experience until we get an effective vaccine in place at scale. From the drawing below you can see that researchers are modeling a summer period when self quarantining and self-isolation have flattened the curve, only to re-emerge again in the fall.[3]
So yes, have optimism that science, government and private interventions, and peoples actions and prayers to God by many will triumph over this crisis, and hopefully it will end sooner than in past crisis. However in your planning be prepared for re-emerging outbreaks and limited operating conditions until there is a vaccine or the disease burns out on its own because there is nobody left to infect. And certainly don’t be fooled by any talk that the economy is going to return to full operation in May, June, July… it's not, and given the huge job losses in the past 3 weeks, the market is likely to recover to a new lower normal, rather than to return to full employment all of those employees that quickly, as the job losses have been too deep. Further, there is a difference between the Stock Market and the economy. The stock market is a forward leading indicator of what future values may be… not a present indicator fo what values are today. This is why some say, buy [stocks] on the rumor and sell [stocks] on the news. One report today on CNBC reported that the general market was trading at a 24x multiple of earnings, and that earnings are expected to fall that are not yet reported so there are likely to be downward revisions and changed multiples, further impacting the market.
Many knowledgable people believe that the broader economic market won’t truly turn the corner until there is a viable vaccine for Covid19. Numerous trials are underway that provide hope; and the reality is that most of these trials will fail. You may recall the race for the vaccine to solve the AIDS epidemic; it took nearly 5+ years, though they threw many minds at solving that problem; and even today there is not a clear single choice for vaccine for HIV. Authorities thinking that it will be at least September 2021 before a vaccine could be ready at mass scale to prevent the disease, so any speed up of that timeline would be good news and unexpected. So we clearly will need to get this economy running and operating at some level before the vaccine is produced. There was a thoughtful article by a leading authority on what needs to happen before things can return to normal that I have listed below.[4]
So why this message at this time? I want to help you, and be a source of inspiration and sounding board for you a this time. I left active executive coaching for a season though my heart never left the industry. As an executive coach and friend, I am sending you a voice of warning with context for your current planning; if you are being tentative thinking that next week or month will be much better; you might want to revisit your assumptions and plan for more difficult times. And lastly I want to give you some encouraging news on what’s happening, and further to coach you to keep your head up and see opportunities around you.
Even though it may be difficulty and outright challenging in your market, there are things you can and should be doing in this crisis. First put the oxygen mask on yourself; secure the capital that you will need to operate for 14 months, preferably. Lender rates are cheap presently and can help you whether this once a hundred year storm. Next, find the tailwinds behind the headwinds you are facing; lean into the tailwinds to find sustainable demand; its a matter of selling what people are buying. I wrote an article on 2/27/20 on what CEOs should be doing now; https://www.epraxis.com/blog/avoid-crippling-fear-prepare-yourself-and-your-business-today-for-a-potential-covid19-virus-outbreak-now, and there may still be some concepts in that article that you can explore for your company.
Now in closing some encouragement and thoughts from others in terms of crisis. Remember that “It's neither the most intellectual of the species that survives; nor the strongest that survives; but the species that survives is the one that is able best to adapt and adjust to the changing environment in which it finds itself.” (Charles Darwin). Ask yourself, how are you adapting? How are you being agile? Keep your look out for opportunities that others will not see because they are heads down in this crisis. If you can’t find the opportunity for the mists of darkness in your way, please call on me and let’s discuss. Sometimes we cannot see what is obvious in front of us that others see so clearly. Lastly, keep looking up. Oscar Wilde said of a similar time, “we are all in the gutter, but some of us are looking at the stars.” And another sage said this, “Many an optimist has become rich by buying out a pessimist,” [5]. Please keep hope alive to make some delicious lemonade from this bitter lemon of an experience.
To conclude, I am attaching some quotes by leaders that you might think of using tactically in your conversation with your teams in this crisis. One of the most sage additions to this attached list of quotes is this one from President John F. Kennedy:
"When written in Chinese, the word 'crisis' is composed of two characters. One represents danger and the other represents opportunity.”
May you find the opportunity in front of you, and reach a little higher to become the leader your company needs at this time.
If I can be of assistance to you in any way please reach out to me.
Endnotes
[3] https://ftalphaville.ft.com/2020/03/17/1584439125000/That-Imperial-coronavirus-report--in-detail-/
[5] Robert Allen
[6] Inspirational “Crisis” Quotes, from Severin Sorensen, ePraxis LEADERSHIP, INNOVATION, & FORWARD-THINKING (LIFT) SERIES.