Sat, Jul 30, 2022

Recession? No, Confusion

I saw this chart in a The Wall Street Journal piece today called If This Is a Recession, We Might Not Know for Months:

WSJChart

Official acknowledgement of recessions in the United States is the responsibility of the National Bureau of Economic Research (NBER). However, their timing is often too late as we can see from WSJ’s graph. During the Global Financial Crisis of 2008, the official call was only made in Dec 2008 even though the recession had actually begun a full year prior. NBER’s criteria to reach a consensus also seems rather fuzzy.

This week, I watched POTUS and Fed Chair Jerome Powell voice their opinions strongly that we are not in a recession. I found Treasury Sec Janet Yellen’s analysis thereafter a bit more thoughtful, in comparison. Then, I saw money managers on CNBC, including Cathie Wood of ARKK fame, declare the end of the bear market and proclaim that the “bottoms are priced in”.

I can safely conclude that everyone knows a lot but also no one knows anything at all. We’re all basically on our own.

As far as the tech industry is concerned, the downturn has already begun with double digit % cuts all across the board. Down rounds, difficulty of raising capital, hiring freezes, you name it. The “growth story” as a selling point for companies public and private seems to be over for the time being. The gloom-and-doom is in full motion.

What’s an entrepreneur gotta do? It’s the worst and best time to be in the process of launching a company. The worst because early-stage capital seems a lot harder to come by. The best because it really tests your mettle as an entrepreneur and your ability to build a profitable business from nothing. Some of the most iconic companies of the last decade were built during the last Great Recession — WhatsApp, Instagram, Uber, Slack, Square and Venmo to name a few. These are the datapoints I look towards for motivation as I build my business.

That said, recessions and downturns change you as a person in a sort of permanent way. They make you more disciplined with finances but they also make you more risk-averse and possibly pessimistic.

What will 2023 and 2024 look like, I wonder? No one knows. Only hindsight is 20/20. What we do know that everyone seems to unanimously agree on is that “inflation is out of f@#%!#% control and someone needs to cool it down.”

But, will it?