Some Good Things about a Recession

Back in January I had the chance to get together with a group of my business school friends on the East Coast.  The mood among the bankers and hedge fund managers was apocalyptic  The financial system, according to almost all of them, was coming to a crashing halt. From the looks of the stock prices of Fannie Mae and Lehman Brothers, and the demise of Bear Stearns, they were at least directionally correct.

Those of us in the technology business were pretty shocked at how bad the bankers thought things were. We didn't even know anyone who had been laid off! And what about that new iPhone? This time, in contrast to 2001, it's Wall Street that's on the downside of a bubble.  And this one is beyond anything seen in the lifetime of the Internet. 

For tech, it may be only beginning. Wall Street banks buy a lot of software and hardware (see that Cisco warning this week?). Investment bankers do a lot of traveling (Expedia?). Mortgage lenders do a lot of advertising (IAC?) Hedge fund managers...well, they're still making money.

But there's no question that the melt down on Wall Street, combined with the skyward rise of oil and commodity prices, will cycle through online media and technology. Some projects will do really well - enterprise software that saves money, for example. But the stupid discretionary projects may be axed.

Is there anything good about this? Back in 2001, several people told me that "a downturn is a great time to start a business." This may make sense once you've lived through it and look back, but it's painful at the time. So for those of you starting or running a startup during this downturn, I thought I'd share some good things about a recession.

 

I remember reading the Wired article in 2006 on The New Boom that argued that "it's different this time!" since we're in a boom (sustainable growth), not a bubble (crazy stupidity).

I don't think anyone in Silicon Valley praying in 2002 for "Please, God, just one more bubble," meant for one in commodities and housing. But that's what we got.  So boom, bust, or bubble, stay focused on the opportunity.

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